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Unemployment, inflation, medical conditions and unexpected events combine, becoming a growing, uncontrolled whirlwind of debt, causing your finances to spiral out of control. After months or years of dodging creditor calls, stress levels flare, affecting relationships with friends and family. If you’re holding on by your fingertips, desperately looking for a break, Illinois bankruptcy and its exemptions might be the calm after the storm you need.
Almost everyone has heard the myth about people losing everything when going through bankruptcy. Although it’s true that many of your assets are liquidated (sold) and used to pay creditors, there are Illinois bankruptcy exemptions that protect most of your personal property. Lawmakers understand that you must keep certain vital assets to emerge from Chapter 7 and survive. As a result, the exemptions protect specific property from being liquidated so that you can thrive when your case is complete.
Illinois bankruptcy exemptions are generous. Most Chapter 7 filings are “no asset” cases, which means that the trustee assigned to your case by the court may not seize any property for liquidation. Here are some of the most commonly used exemptions in Chicago.
State law protects up to $15,000 worth of property, including:
This would be the total amount of equity available if the trustee sold the property, not its total value. Most people have exhausted the equity in their homes or properties by the time they file for bankruptcy protection, so they don’t have much, if any, equity available.
For example, you have a mortgage. To pay expenses, you take out a second mortgage. Now you can’t afford the monthly mortgage payments, and the debt is almost as much as (or more than) your home is worth.
Bankruptcy trustees typically seize property they can liquidate for a significant amount above the exemption. The state exemption protects vehicles worth up to $2,400. Before determining whether to accept the exemption, they factor in the cost of advertising and selling the vehicle.
These payments are exempt up to the amount considered reasonably necessary to support you and your dependents. The partial to total amount of the payments may be exempt.
If you receive personal awards and settlements, they are exempt up to $15,000. The entirety of a worker’s compensation award/settlement is also exempt.
State bankruptcy laws protect a broad range of assets. You may only qualify for some of them or have to decide which ones are most important. Additional exemptions include:
Necessary clothing, schoolbooks, family photos, and property held in trust are also protected in bankruptcy.
Depending on your situation, you may qualify for federal nonbankruptcy to supplement the Illinois exemptions. They typically apply to specific government employees or groups of individuals, from judges and military service members to seamen and railroad workers.
The exempt property is the same, regardless of whether you file Chapter 7 or Chapter 13. The difference is in how the trustee handles nonexempt property. In Chapter 7, the bankruptcy trustee sells eligible assets to pay creditors. In Chapter 13, your disposable income or the bankruptcy value of nonexempt property equity must be paid in the repayment plan.
Bankruptcy is a complex legal process. It also affects your ability to get a loan, lease and other high value items. The law doesn’t require that you have a lawyer. However, having experienced counsel can ensure you get the most from the process, including keeping as much of your property as possible. Contact me or call 312-945-0021 to schedule a free initial consultation to learn more about bankruptcy and whether it is right for you.
The post What are Illinois Bankruptcy Exemptions? first appeared on Chicago Bankruptcy Attorney J. Kevin Benjamin .
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