The following snippet is from the Legal Action television show which airs on Comcast Cable in the suburban Chicago market. Attorney David Siegel talks about the types and amounts of property that can be kept while filing for Chapter 7 bankruptcy relief.
Interviewer: When I do Chapter 7, fresh start, is there any property that I can keep?
David Siegel: Yes. You can keep a lot of property in a Chapter 7, which is why it’s a good idea to disclose everything to your attorney. For example, real estate; an individual can protect up to $15,000 worth of equity in real estate. If it’s a joint case, husband and wife, they can protect up to $30,000 worth of equity. They can protect all of their 401(k), they can protect their pension, they can protect injury proceeds.
Interviewer: So like a worker’s compensation?
David Siegel: Worker’s compensation is 100 percent protected as long as there’s not a third party claim against a machinery manufacturer or another individual.
Interviewer: How about a garden variety auto accident case?
David Siegel: Any kind of minor auto injury is not going to bring a return high enough for the trustee to take. There’s a $7500 exemption; so the first $7500 that an individual recovers in his pocket would be protected.
Interviewer: Excluding any attorney’s fees that he’s paid or costs.
David Siegel: That’s right. I’m talking about the net, the final amount that the individual gets. Also, vehicles are protected up to $2400 in equity each, and there’s a $4000 miscellaneous – what they call wild card exemption which can be sprinkled over any kind of personal property. So you can use the auto exemption for $2400, and whatever is left of the $4000 wild card to protect the vehicle as well. So you can technical have more than $2400 equity in a vehicle, and most debtors in a bankruptcy are not in a positive equity situation with their vehicles anyway.
Interviewer: What happens, for example, let’s just say I have a Harley and we’ve gone through the wild card and the $2500 exemption am I going to lose it?
David Siegel: You have a couple of choices with regard to a Harley that has equity or a paid off vehicle. You can either surrender it to the trustee in exchange for your fresh start. The trustee will then sell it, administer the asset, pay the creditor a prorata share or you can keep the Harley. But you’re going to have to buy out the trustee’s interest, and that’s something your attorney would have to negotiate with the trustee. Typically people do not want to give up their cars, their motorcycles, their prize possessions. In those cases they would much rather negotiate with the trustee, eliminate their debt, but realize they have to pay something to the trustee in exchange for that fresh start, and that’s where the liquidation element comes in. They’re liquidating, their nonexempt or non-protectable property in exchange for that fresh start, and sometimes it’s well worth it.
