Top Five Bankruptcy Exemptions in Illinois

Many people hesitate to file bankruptcy because they are afraid they will lose their house and other assets. But these bankruptcy creditor seizures only occur in board games like Monopoly. In the real world, Illinois has some of the broadest bankruptcy exemptions in the country. Since state law prohibits creditors from liquidating these assets, filing bankruptcy might be the only way to protect them. Otherwise, creditors might be able to go to court and liquidate them.

Bankruptcy protects your assets because such protection helps ensure a fresh start. If debtors lost their hard-earned assets, they would be forced to go back behind the starting line. A Chicago bankruptcy lawyer can show debtors many other ways to take full advantage of their fresh starts. There are a number of obscure loopholes in the Bankruptcy Code. An attorney knows how to make these loopholes work for you, instead of against you.

Home Equity

Trustees (people who oversee bankruptcies for judges) cannot seize homes unless the sales prices would substantially exceed the home equity exemption amounts. At first blush, the $30,000 home equity exemption does not seem like much. But upon closer inspection, and with an attorney’s help, it is usually more than enough to fully protect your family’s home.

Because of loan amortization, most people pay mostly interest for the first six or eight years on a twenty-year loan. As a result, although they have paid tens of thousands of dollars and their homes are worth substantially more than that, they have very little equity.

Additionally, there is a significant difference between a house’s quick sale value, which must be listed on Schedule A, and a house’s fair market value. For example, most home investors offer pennies on the dollar. These low offers, which an attorney should review, stretch the home equity exemption further.

Retirement Accounts

IRAs, 401(k)s, and other nest egg accounts are tempting targets for trustees. The cash is just sitting there ready to be seized. But not so fast. The Supreme Court recently restated that these accounts are 100 percent exempt, regardless of their size.

Government Benefits

Many older people are afraid to file for bankruptcy because they are afraid of losing their Social Security benefits. The fear is understandable. Most Social Security recipients count on these benefits for most or all of their monthly income. However, according to both the Social Security Administration and bankruptcy law, Social Security benefits are assets and not income. As a result, like retirement accounts, they are completely exempt.

Current Wages

Some states do not exempt wages in bankruptcy. As a result, debtors are hard-pressed to pay monthly expenses, especially right after they file. But Illinois law automatically exempts 85 percent of gross wages, not net wages.

Motor Vehicles

The aforementioned equity principles apply to cars, trucks, boats, and almost any other motor vehicles. Most new vehicles have high values, but the owners have almost no equity in them, again because of amortization. Most used vehicles are mostly paid off, so owners have substantial equity in them. But after a few years, a vehicle’s market value drops to almost nothing, especially if it needs any work whatsoever.

Another issue often comes into play here. These numbers are not just theoretical. If the trustee seizes exempt property, the trustee bears the entire risk of sale and all the costs associated with that sale, such as storage fees and repair costs. Very few trustees are willing to undertake such risky projects.

Rely on Experienced Lawyers

Your most important assets are safe in bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Indiana and Illinois.

https://bentzholguinlaw.com/can-bankruptcy-protect-my-indiana-house/