Many people fear filing for bankruptcy will mean surrendering their possessions. But one of the most attractive features of bankruptcy is that it can legally
protect your assets from creditors, thanks to a long list of exemptions.
Now, if you're filing for Chapter 13 (also known as debt adjustment), you probably don't have to worry about exemptions. Because you will be paying off your debts
under a proposed Chapter 13 repayment plan, you'll gain automatic protection against repossession.
Of course, sometimes repayment isn't an option. Chapter 7 bankruptcy (otherwise known as liquidation) is usually the best choice when you don't have major assets —
like a home — to protect from creditors. On the positive side,
you won't have to worry about making payments, and you can usually wipe out your debts quickly. However, you may be required to give up some assets in exchange for the discharge of these debts.
Fortunately, each state has its own unique set of exemptions — items that are legally protected from liquidation because they're considered necessary.
Illinois homestead exemption may preserve your home
For example, as of January 2009 in Illinois, you can exempt up to $15,000 of the equity in your house. What does that mean exactly? If the current resale value of
your home minus the amount left on your loan is less than $15,000, your house is safe.
So let's say your home is worth $150,000 and you still owe $140,000. That means you have $10,000 of equity in your house. Since it's less than the $15,000 limit,
you can keep your home as long as you continue paying the mortgage.
However, if your state's exemption limit doesn't cover your equity, it's possible that your bankruptcy trustee could liquidate — i.e., sell your house — to raise
money for your creditors. Now, this doesn't necessarily mean you will lose your home. If you find you're eligible to file for Chapter 13 instead of Chapter 7, you
can work out a repayment plan instead of liquidating, and your house will be exempt from foreclosure.
Whatever your situation, getting a professional opinion can help ensure you find the debt relief plan that is as pain-free as possible.
Call DebtStoppers today at 312-913-0630 or sign up for our free, one-on-one debt analysis to learn how bankruptcy can help you get a fresh financial start.
In the meantime, here's a quick summary of the most common bankruptcy exemptions in Illinois. By no means is this summary comprehensive. The full list is quite
long and subject to change. The following is current as of January 2009.
In Illinois, you can keep:
Property up to $15,000 equity
Vehicles up to $2,400 equity
85 percent of your wages (but it's possible a bankruptcy judge will allow you to keep more)
Most personal property, including household goods, clothing, tools of the trade (stuff required for your job), books and family heirlooms such as photos
Money owed to you, such as unemployment, workers' comp, disability, alimony, child support or Social Security
In Georgia, you can keep:
Property up to $10,000 equity
Vehicles up to $3,500 equity
At least 75 percent of your wages (again, a bankruptcy judge can adjust this amount)
Most personal property (similar to Illinois)
Money owed to you, such as unemployment, workers' comp, disability, alimony, child support or Social Security
The complete bankruptcy exemption lists for each state are much longer. A professional bankruptcy attorney can evaluate your individual situation and identify
all the exemptions you will be able to take if you file for bankruptcy.
While you might find the rules for exemptions confusing, keep in mind that most people who file for Chapter 7 don't lose any property at all,
as most of their belongings are deemed necessary.
There's one more thing to keep in mind. To qualify for a state's exemptions, you must have lived in the state at least two years prior to filing for bankruptcy.
If you have not, you might be able to claim exemptions for the state you previously called home, depending on how long you lived there.
Confused? You're not alone. The laws surrounding bankruptcy are complex. Fortunately, our professional bankruptcy attorneys are used to deciphering complicated
bankruptcy laws so you don't have to!
It's understandable that you are concerned about your belongings. But remember — if you're in debt, there are zero exemptions if you don't take action.
Bankruptcy, on the other hand, can stop repossession in its tracks. Not only that, but it eliminates debt so you can keep your assets not just now, but well into the future.
Call DebtStoppers today to learn how bankruptcy can help you get a fresh financial start
Find out today if bankruptcy can rescue you from the shadow of debt and put you on the path to a brighter financial future. Call DebtStoppers now at
312-913-0630 or sign up for a free personal debt analysis in just seconds online.
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