What makes a case an Assets Case?

[kathy4530050]

Can anyone tell me? Is it that you have too much personal property? (I have almost nothing of value--old furniture, older car, no toys) Is it that you don't pass the means test or your income is too far over the median? Is an assets case automatically a Ch 13?

Thanks

[mountainmom]

Our tax return, stimulus check and $400 in our bank made us as assests case. But our lawyer is not the greatest and i think we could have avoided it if he did the exemptions properly

[StartingOver08]

A Ch 7 assets case doesn't get automatically converted to a Ch 13. Those are two different things. In an assets case the Trustee gets the assets to distribute to the creditors and then just discharges the case. If the assets have to be liquidated first, this can take some time. The Ch 7 Trustee gets paid more to find assets - they get a commission on the assets recovered. If it is converted to a Ch 13, then the Ch 7 Trustee does not benefit.

The Trustee's may try to dismiss a Ch 7 case under the 707 abuse provision. One of the remedies available is to convert to a Ch 13 instead.

This link contains detailed information from the US code Title 11, 707 Dismissal or conversion of a case.

http://www4.law.cornell.edu/uscode/11/707.text.html

[justbroke]

Can anyone tell me? Is it that you have too much personal property? (I have almost nothing of value--old furniture, older car, no toys) Is it that you don't pass the means test or your income is too far over the median? Is an assets case automatically a Ch 13?

Thanks

An asset case is simply one that has non-exempt assets which have enough value for the Trustee to liquidate. A very simple liquid asset is your tax refund (as mountainmom suggests). However, astute attorneys will exempt your tax refund, so that your tax refund doesn't make your case an asset case. (This isn't always possible because there are limits on the amount of assets -- generally by type -- that you can exempt. Tax refunds are generally exempted under a wildcard.)

Other non-exempt assets could be, the equity in your home or car that exceeds your State's (or Federal) exemptions. It could also be property which you can't exempt, or which has way too much value. Generally, large amounts of cash on-hand or in banks, will be non-exempt (after a certain amount... although some States have very-very-very low "cash" exemption amounts).

So, if you have old(er) everything, and no equity, you will (probably) be a no-asset case, unless that pesky tax refund issue hits you.

• Assets cases are not in any was associated with pushing you to a Chapter 13. The "means" test determines this, not whether you have liquid/illiquid assets that can be sold.
• Too much personal property, does not mean you are an asset case. It's just what you can't exempt using State/Federal exemptions. It also is dictated by the Trustee's interest in the property. Many times, a Trustee will "abandon" a piece of property that has value, but not enough for the Trustee to make any real money on it.
• Passing the means test isn't as simple as being under the median. The means test is "expense" based. Let me clarify... the means test is based on allowable expenses. You can be over median, and still "pass" the means test. A typical example is someone over the median, but has medical expenses for personal or family reasons which are completely justifiable and allowable.

Hope that helps.

[kathy4530050]

Thanks everyone, that helps a lot. I went to the link that StartingOver posted, but the legalese is just a little too thick for me. Can anyone explain the 25% thing? I've read something about that here before. Something about the ability to repay 25% of your total debt or something like that?

Now that my business is doing better, I think I might be looking at a Ch13 . . .

[justbroke]

The 25% thing is obscure, but still counts. This was designed as part of the "Abuse" portion of the BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) of 2005. This was to push more people towards a Chapter 13 as possible... but not being too obtuse about it.

Basically if you do have money left over (subtracting Schedule J expenses from Schedule I income), then you simply multiply that amount by 60 (the maximum length of a Chapter 13). If that amount is less than 25% of all your unsecured (non-priority) debt, then you pass the means test. (Note: taxes from the IRS are "priority" unsecured, and don't count in this calculation.)

[kathy4530050]

The 25% thing is obscure, but still counts. This was designed as part of the "Abuse" portion of the BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) of 2005. This was to push more people towards a Chapter 13 as possible... but not being too obtuse about it.

Basically if you do have money left over (subtracting Schedule J expenses from Schedule I income), then you simply multiply that amount by 60 (the maximum length of a Chapter 13). If that amount is less than 25% of all your unsecured (non-priority) debt, then you pass the means test. (Note: taxes from the IRS are "priority" unsecured, and don't count in this calculation.)

Good explanation. Thanks.