Last week, Nancy H. came to my office looking to file a Chapter 7 bankruptcy case. She had $20,000.00 or so on credit cards and no other unsecured debt. She had a condominium that had a value of $89,000.00 and a mortgage debt of approximately $80,000.00. Thus, there was some equity in her condominium, but not an amount that exceeded the amount that she could protect with her Illinois homestead exemption. The only issue or potential asset problem dealt with her auto. She had a 2010 vehicle that was paid in full. A look at the KBB website indicated that the vehicle was worth approximately $8,000.00 as a trade-in value. At this value, there would be $2,500.00 – $3,500.00 exposed beyond what she could protect with exemptions (both automotive and wildcard). It is these case situations that separate the quality bankruptcy attorneys from the ones that simply push the paper and file volume petitions. If the debtor files with that vehicle still in her possession as an asset, there is a 75% chance that a Trustee will wish to administer the asset for the benefit of creditors. I would not advise that the debtor file with that property in hand. Instead, I would recommend that the debtor trade-in the vehicle for one that has less equity. For example, she could purchase a vehicle that has a value of $4,000.00 – $5,000.00. That way, the Trustee would have no interest in administering the asset since the non-exempt portion would be too small. She could use the additional funds on her living expenses. These expenses include mortgage, insurance, food, clothing, utilities, transportation costs, etc. It is much more preferable for her to utilize the potential non-exempt asset then to turn it over to a Trustee in exchange for keeping a vehicle.
Most Chicago bankruptcy attorneys would not give this advice. Most would simply push the debtor forward in a Chapter 7 case as is. This could lead to the disastrous situation where the debtor is paying a Trustee in order to keep her car. It is much more preferable to be able to dictate the case then to have the outcome of the case dictated by the Trustee. The Trustee has the duty to administer non-exempt assets for the benefit if creditors. If you can limit or eliminate the opportunity for the Trustee, the debtor is going to have a better experience going through the bankruptcy process. Lastly, a good experience for the debtor is going to lead to positive feedback for the bankruptcy attorney and for the law firm. It’s a win-win situation.
