Protecting Your Assets In A Chapter 7 Bankruptcy Filing
There are two main goals in filing a chapter 7 bankruptcy. The first goal is to eliminate as much debt as possible in order to get a fresh start. The second goal is to protect either all or as much of your personal property as possible while going through the process. The state of Illinois provides for specific property exemptions. These exemptions allow you to protect equity in real estate, equity in personal property, and otherwise protect assets from creditors. The bankruptcy trustee, who is assigned to your case, has the duty of examining all of your assets to determine whether or not there is anything available for administration to creditors. This balancing of your exempted assets versus the trustee’s desire to acquire assets for the benefit of creditors is where your attorney’s expertise comes into play significantly.
If you are a homeowner, you should know that you can protect up to $15,000 worth of equity in that property. If you are filing as a joint case, husband and wife, then you can protect together up to $30,000 worth of equity in your homestead. You technically can protect even more than that because the trustee has to figure what it’s going to take to sell the property. If we factor in a typical 6% broker’s commission and cost of sale, a $300,000 house will eat up another $18,000 worth of expenses. Once the trustee factors in the $18,000 plus the $30,000 worth of equity, there may not be any non-exempt equity left.
In terms of personal property, you can maintain $2400 worth of equity in a motor vehicle. In a joint bankruptcy case, you can protect up to $4800 worth of equity in one motor vehicle. You also have a $4000 miscellaneous catch-all, wildcard exemption that can be placed over any type of personal property. In a joint case, you can protect up to $8000 worth of wildcard exemption which can be sprinkled over any type of personal property.
Your bankruptcy attorney is going to be able to advise you as to whether or not any of your property is subject to administration. If there is property subject to taking by the trustee, your attorney should advise you of this and make you aware of the consequences of filing a chapter 7 bankruptcy. In some cases, people are willing to give up specific property in exchange for a fresh start. In other cases, individuals expect to keep all of their property while going through the process. There is nothing worse than having property spring up at the last minute or become aware to the attorney and the trustee at the meeting of creditors. At that time, it’s too late to save that property from the long arm of the trustee. This is why it is most important for bankruptcy clients to be open and honest with your attorney. If your attorney is aware of specific property, he can make proper adjustments or advise you accordingly in order to save that property. If however, you do not let your attorney know the truth, and you admit you have the property at a later date, the attorney has his hands tied as to how he can protect you under chapter 7.
The laws of the state of Illinois are very liberal in terms of what property you can keep while going through this process. As I mentioned, you can protect up to $15,000 worth of equity in your home. You can protect up to $4000 worth of miscellaneous personal property. You can protect up to $2400 worth of equity in your vehicle. You can protect all of your life insurance provided it’s death benefit only or if it’s whole life, provided the beneficiary is either your spouse or dependent child. You can also protect all of your 401(k), pension, or other retirement account. Thus, filing bankruptcy in the state of Illinois under chapter 7, allows you to protect most if not all of your personal property while getting a fresh start.
For more information on your rights under chapter 7 bankruptcy law and as to how your property is going to be protected, contact my office at 847-520-8100. The consultation is free and the information is valuable.
