Earlier this year I explained that “no-asset bankruptcy cases” are really “no non-exempt asset bankruptcy cases.” The idea is that unless they live in communes, all debtors actually do have assets. The question is really the extent to which they matter in a New York bankruptcy. So let’s clear up some misconceptions about “assets”: what they are or are not, and why they matter (or don’t).
The Bankruptcy Code doesn’t specifically define “assets”; rather, it simply says that all the debtor’s property, whether by legal or equitable title, goes into the bankruptcy estate. (Click to read more about what exactly is an asset in New York bankruptcy.) It doesn’t need to be backed by documentation like a house or car. This means that literally everything a debtor owns is an asset, right down to his or her clothes. Thus, what its value is doesn’t define whether it’s an asset, but that it has value does. If it has value, it’s an asset, and all assets must be disclosed.
Naturally, debtors might be concerned that if this is true, they’ll lose all their assets in bankruptcy. This is incorrect. For a variety of reasons, debtors will be able to keep many assets. They might be covered by an exemption, or more commonly the trustee might not be able to or interested in liquidating them. So no, trustees do not want the clothes on debtors’ backs, barring odd exceptions like luxury fur coats.
Another misconception is that assets’ role in debtors’ net-worth estimates are somehow more important than what they are or how much they’re worth. Debtors who have a negative net worth, i.e. the value of what they owe exceeds what their assets are worth, must still list all of their assets. Many debtors’ household goods or personal items might be worth more than their cars or houses, given their auto loans or mortgages, respectively. So debtors can’t expect to keep everything just because they owe more than their assets are worth.
The question, then, is how much could the trustee sell any particular asset for? Pens and pencils probably aren’t worth anything, but there many assets debtors own that have surprising value. Here is a list of examples of unusual or uncommon assets in bankruptcy.
Assets can be tangible or not; they can be in the debtor’s possession or not; they can be rights to future claims or not. What matters is if they’re listed in the bankruptcy petition, what they’re worth, and whether they can be shielded by an exemption.
Because so many things can be assets, it’s crucial to discuss your situation with an experienced New York bankruptcy lawyer to ensure your petition is accurate. Unlisted assets cannot be protected by exemptions.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
