If you read blogs like this one, or other Bankruptcy resources, you will no doubt run across references to “no asset” Chapter 7 cases. Although the term “no asset” is not a defined term in Bankruptcy law it actually has a very specific, and very important, meaning in Chapter 7 cases. It means that the Chapter 7 Trustee has reviewed your schedules and any other information they may choose to review, and determined that you have no unexempt assets in your case, your unexempt assets are not enough for a meaningful distribution to creditors after liquidation and case expenses, and there are no other assets the Trustee may recover from others (such as preferential or fraudulent transfers). The majority of Chapter 7 cases are no-asset cases and after the Trustee has entered their final report the case is usually closed. This is good news for individuals in Bankruptcy, as it means the case is over and they can move on with their lives! A second very important benefit of a no-asset case is that if you unintentionally omitted a creditor in your case, almost all Courts have held that the undisclosed debt is still discharged. This is a “no harm, no foul” rule since even if the creditor was listed the debt would still have been discharged, the creditor still would have received no distribution in the case, and it would be a waste of judicial resources to make someone re-open a case just to add the creditor.A few other points about no-asset cases:
- There is no set timeline for the Trustee to enter the “Report of No Distribution” (or “NDR”) on the case docket, although there are several technical requirements and rules behind the scenes. Some Trustees may enter the report within a day or two of the first meeting of creditors just to get it off their plate early. Others may wait a few days or a few weeks, whenever they get around to it. It does not mean there is a problem with your case.
- If the Trustee is investigating your case to see whether assets may be available, they will normally enter a report stating so. Often, they investigate and then enter the NDR.
- If there are assets in the case that the Trustee will “administer,” it is not a no-asset case so the NDR will not be entered.
- A few cases go from asset cases to no-asset cases. For example, if the Trustee believes there is quite a bit of equity in a house or other property and selling it would net several thousand dollars for creditors, the Trustee might hire a broker and put the property up for sale. If they later determine the property is not worth what they initially thought, they will withdraw the sale and enter an NDR.
- If the Trustee enters the NDR early, the case will not be officially closed until after the time has run for parties to object to your discharge (about three to four months after the case is filed). In our district, cases are typically closed within a day or two after the NDR is entered and the objection deadline has passed, whichever happens last.
- NDR’s are typically docket entries and not actual documents served on parties. I will typically notify clients of the good news when I see it pop up on my docket reports. In my district, the docket entry looks like this:
Chapter 7 Trustee’s Report of No Distribution: I, [Trustee’s Name], having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. Pursuant to Fed R Bank P 5009, I hereby certify that the estate of the above-named debtor(s) has been fully administered.. I request that I be discharged from any further duties as trustee. No party in interest has filed a request for an order of dismissal pursuant to 11 USC 521(i)(2). Key information about this case as reported in schedules filed by the debtor(s) or otherwise found in the case record: This case was pending for 2 months. Assets Abandoned (without deducting any secured claims): $_______ , Assets Exempt: $_____, Claims Scheduled: $ ______, Claims Asserted: Not Applicable, Claims scheduled to be discharged without payment (without deducting the value of collateral or debts excepted from discharge): $_____.