People are always concerned that they can lose their car or furniture when they file a Chapter 7 case. While it is a reasonable concern, the law recognizes that one can keep more than just the shirt on his back when going through bankruptcy.
Property exemptions determine what property debtors may keep. Illinois has its own exemptions rather than the federal bankruptcy exemptions. Most exemptions listed here can be doubled for married couples. That includes same gender married couples.
The following article discusses the most frequent Personal Property exemptions allowed Illinois individuals who file a Chapter 7 or a Chapter 13.
PERSONAL PROPERTY OF ANY KIND UP TO $4,000
Generally when we think personal property we think of cash, bank accounts and furniture. But this exemption is also a "wild card" that can be used to supplement many other exemptions that have specific limits. It is important to realize that used furniture generally has almost no resale value so most of the "wild card" can be used elsewhere.
The limit for equity in a motor vehicle is $2,400 for one vehicle. In bankruptcy, one looks at the amount a trustee could obtain if they sell the car, which is essentially the trade-in-value.
Cars are the one asset that frequently has the "wild card" exemption added to the regular car exemption. If one owns 2 cars the "wild card" must be used. For married couples, if there are two vehicles and each is titled in both names they get 2 exemptions.
CLOTHING AND TOOLS OF THE TRADE
Necessary wearing apparel is 100% exempt.
TOOLS OF THE TRADE
The exemption is $1,500 for work related tools, implements, and equipment.
Worker's Compensation claims are 100% exempt, including awards for occupational diseases. However, in Chapter 13 cases, the claims get more complicated so be sure to discuss this subject thoroughly when filing a Chapter 13.
PERSONAL INJURY CLAIMS
The exemption for personal injury claims is $15,000 of the net amount one would receive after attorney's fees and medical bills. This exemption includes the wrongful death of a person who was your dependent. Again the "wild card" can be used to increase the exemption, up to close to $19,000.
PENSION AND RETIREMENT AND LIFE INSURANCE BENEFITS
There is a 100% exemption to qualified pensions and retirement benefits. That would include Individual Retirement Accounts (IRA) and 401(k) accounts. The amounts received because of the death of an insured person are 100% exempt.
MISCELLANEOUS OTHER FACTORS
There are some other enumerated exemptions but the above cover the vast majority of individuals seeking bankruptcy protection. Some of the remaining exemptions are for medical aids and also for Social Security or public aid benefits.
PROPERTY IN EXCESS OF ALLOWED EXEMPTIONS
What if a person's personal property is over and above allowed exemptions by $1,000 or $2,000? Even the most aggressive trustee will not attempt to sell assets unless the trustee is able to garner at least $2,000 for the benefit of creditors.
CHAPTER 13 AND PERSONAL PROPERTY EXEMPTIONS
It is not the practice of Chapter 13 trustees do not sell property. The purpose of the exemptions in Chapter 13 is to determine if general unsecured creditors would receive a dividend in Chapter 7. If so, this can affect the dividend to general unsecured creditors.
Assume that after exemptions $10,000 would be paid to general unsecured creditors in a Chapter 7. In a Chapter 13 if the total amount of debts to general unsecured creditor is $40,000 (assuming no priority creditors) the dividend paid to unsecured creditors in Chapter 13 would have to be at least 25% (divide 10,000 by 40,000).
For a more in depth analysis of exemptions and how it might affect you personally, feel free to call us. Our advice is free and confidential.
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