Should You File Bankruptcy If You Have No Assets?

Protection of your assets is one of the most important reasons to file for bankruptcy.  Even if you don’t have any assets now, filing a Chapter 7 or Chapter 13 bankruptcy can protect your future assets.

Under state laws, creditors can sue you and take your property, but most states have laws called “exemptions” that protect some (or all) of your property from your creditors.  If your state laws protect all your property, then the creditor with a judgment walks away empty handed.  At least they do, for now.

If you have debts you don’t pay, creditors can file a lawsuit to sue you.  If they do, and you don’t have a defense, they will get a judgment against you.  In the state of North Carolina, where I live, judgments can survive up to twenty years, which means that the creditor can keep coming back to see what you own, in hopes that one day you will have something to take.  Some states allow wage garnishments.

Even if you think all your property is exempt (protected) you might find that a judgment creditor has levied your bank accounts and you are cleaned out. As you pay down equity in your house or car, save up money, or inherit property, you will have that judgment looking over your shoulder ready to pounce.

Of course, this decision should be made on a case by case basis.  For instance, someone who is elderly, living on social security and not going to get any new assets might not need to file to protect assets, but they might chose to file to stop creditor harassment.

You should discuss whether or not filing for bankruptcy makes sense for you with an experienced bankruptcy attorney.

see also:  Will bankruptcy stop garnishment on a judgment against me? by Cathy Moran