When going through either Chapter 7 or Chapter 13 bankruptcy, the court is going to start by trying to find ways to pay as many creditors as possible. In most cases, the person filing for bankruptcy won’t have significant equity in their home or major assets that could be liquidated to pay off debts. In some situations, however, the equity and assets are there. If you are in a situation where you have a lot of equity, some major assets, or a combination of both, you will want to know what the court is going to do before filing for bankruptcy.
Bankruptcy Homestead Exemption
There is a law in Illinois that allows those going through bankruptcy to exempt a certain amount of equity in their primary home from the process. For both Chapter 7 and Chapter 13, you can keep up to $15,000 in home equity as an individual, or $30,000 if you are a married couple. Any equity beyond this amount is subject to being used in order to pay off creditors. You can attempt to petition the court to be able to keep more of the equity in your home untouched, but the default response is typically going to be no.
What Happens to Your Assets?
If you own major assets, you will need to look closely at each one to determine what is going to happen. This is mostly relevant only in Chapter 7 bankruptcies because you will be working out a payment arrangement with Chapter 13, so you can keep your assets. Illinois has a list of many exemptions that will apply so the courts won’t take away everything you own. The major items listed in this law include the following:
- Vehicles – You can keep up to $2400 in equity for your vehicles.
- Personal Property – Most types of personal property are automatically exempted. This includes things like clothes, household appliances, books, family heirlooms, and more.
- Trade Equipment – Any assets you have that are used as a part of your job (tools, computers, etc) are exempted from bankruptcy.
- Owed Money – If you are owed money for things like workers’ compensation, disability, child support, alimony, Social Security, or unemployment, it will usually be exempted as well.
- 85% of Wages – You are permitted to keep at least 85% of your wages, though a judge can, and often will, increase that amount.
- Boats – The title certificate for boats that are over 12’ may be exempted.
- Other – There is also a “wild card” exemption that will allow you to keep up to $2000 of any type of personal property.
We Are Here to Help
The bankruptcy laws in Illinois are quite complex, and it is made even more complicated when you have significant assets or equity. Having an attorney who is experienced in these areas will help ensure you are able to keep as much of what you own as possible. Please contact us to schedule a consultation and determine the best course of action today.