Chapter 7 bankruptcy is known as liquidation bankruptcy. However, in most cases, there is nothing to liquidate. The debtor gets to keep a large portion of personal property while going through the process. The Illinois law that allows the debtor to keep property while filing for bankruptcy is known as exemptions. They apply to homes, vehicles, personal property, retirement accounts, life insurance and much more. To ensure that your property is protectable while filing for bankruptcy, you should consult with an experienced bankruptcy attorney to learn your rights. The transcript of the video below talks about the process of keeping property while filing for bankruptcy relief.
David Siegel: Well, Chapter 7 is basically, we know it as a fresh start, it’s known as fresh start bankruptcy. But it’s actually called liquidation under the bankruptcy code. So what I like to tell my clients is it’s pretty much you are putting all of your belongings, whatever you own, you are putting it in a box, you are bringing that box before the trustee, you’re laying it all out there and saying this is what I have. I need to liquidate this, I need a fresh start. But in reality, Illinois law allows you to protect a lot of those items, if not all of them while you are going through the bankruptcy. So the trustee has to see what you have, you are throwing it out there, you are not hiding anything. You are then saying Illinois law allows me to keep all this stuff so I’m going to take it back with me and I’m going to eliminate the people on my petition and schedules such as Discover, MasterCard, American Express and any other medical bill and any other unsecured debt. So you are technically liquidating your bankruptcy estate but in many cases, there’s nothing to liquidate because it’s all protectable under Illinois law. And that’s a beautiful thing.
