Many financial experts and analysts have frequently made the case that the no-asset bankruptcy cost should be very low cost, such that most consumers can get bankruptcy cheap and affordable chapter 7. A major reason often advanced by such experts, especially in times of harsh economic conditions and rising cost of bankruptcy such as today, who make the case that the cost of routine bankruptcy to be a cheap, low-cost affair, is rooted in the argument that an overwhelming majority of personal bankruptcy cases, particularly the Chapter 7 types, are simply "no asset" or "minimum asset" cases. This is defined as a bankruptcy case of the type where the debtor who owes the debts legally has or owns absolutely NOTHING – no money or property of the type, or worth or value that the creditors can possibly claim or seize from the debtor under the law , if the debtor does not pay them (quite apart from the fact that the debtor lacks any with which to pay the lawyer's hefty fees).
The basic argument of these bankruptcy experts and professionals, including law professors, lawyers, court trustees and judge, who make this point, is that such no-asset cases are routine, simple and straightforward in character, in that they require nothing complex but only simple routine paperwork by the debtor or an assistant to prepare the debtor's bankruptcy case for the court and to do the processing of the case. And secondly, that in such cases the creditors generally offer no contest or challenge to the case once they become duly aware that a debtor's bankruptcy petition is in fact a no-asset case because they stand to gain or collect nothing any way by doing so. Hence, they generally argue, the no-asset bankruptcy cost should be very little, cheap and most affordable Furthermore, the same argument is used by those who say that such cases really do not need the services of a lawyer in handling them since, they say, that such bankruptcy cases are generally too simple, elementary and largely clerical for one to undertake.
THE BASIC TYPES OF BANKRUPTCY CASES
There are, of course, basically two types of PERSONAL bankruptcy cases provided for under the US Bankruptcy Code – the Chapter 7 and Chapter 13 types. These designations derive from the names of the chapters of the Code that describe them. A brief description of each of these:
CHAPTER 7. Often called "liquidity" bankruptcy, this type of bankruptcy primarily contemplates an orderly, court-supervised procedure by which a court-appointed "trustee" takes over the assets of the debtor's estate (to the extent that he or she has any , if at all), "liquidates" or reduces them to cash, and makes distributions of such recovered funds to creditors. The debtor is allowed to retain certain "exempt property" that will allow him the bare necessities to enable the debtor to live on even after bankruptcy. In practice, however, there is usually little or no nonexempt property left in most chapter 7 cases, and since, there is generally no actual "liquidation" of the debtor's assets in the average case. These cases are called "no-asset cases."
CHAPTER 13. This is often called the "adjustment of Debts" bankruptcy for an individual with a regular income. This type of bankruptcy is designed for an individual debtor who has a regular source of income. Chapter 13 is usually preferred to chapter 7 by debtors who have some valuable asset that they need to keep, such as a house, because this type of bankruptcy enables the debtor to propose a "plan" to repay creditors their debts over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief because they do not meet the "means test" requirements. Basically, in a Chapter 13 case, the debtor works up a "payment plan" approved by the court by which he or she then repays the debt, in part or in whole.
What property may you keep in bankruptcy?
In Chapter 7 cases, which is the one that typically involves limited or no assets, the overwhelming majority of debtors who file them keep all of their property. (The basic principle of the Bankruptcy Code or law, aims to give the debtor a fresh start, not to punish).
The following property may be exempt under Section 522 of the US Bankruptcy Code (11 USC 522):
a. Home up to $ 17,425.00 in equity;
b. Disability or unemployment benefits;
c. Life insurance policy with loan value up to $ 9300.00;
d, Alimony and child support;
e. Most pensions and some IRAs (401 K plans are also protected and under New Jersey law do not even become part of the bankruptcy estate. Evans v. Evans, 2001 WL 1711048 [NJ Super. Ch.] IRAs that qualify …