Bankruptcy Exemptions In A Chapter 7

For some reason, Chapter 7 bankruptcies are often called liquidation bankruptcies. However, because of the Automatic Stay, creditors cannot usually liquidate assets in bankruptcy, regardless of the delinquent payment amount. Section 362 of the Bankruptcy Code also prohibits most other kinds of adverse creditor action, like wage garnishment and collection lawsuits. Furthermore, the trustee (person who oversees a bankruptcy for a judge) can only liquidate nonexempt assets. As outlined below, most people do not have nonexempt assets.

So, fear of losing your house, car, or other asset to liquidation should not stop distressed debtors from working with a Chicago bankruptcy lawyer and requesting Chapter 7 relief. An experienced lawyer maximizes the fresh start which the Bankruptcy Code guarantees. An attorney thoroughly reviews your case and gives you solid legal advice about your debt relief options. Furthermore, once the case goes to court, a lawyer can unlock some advanced Chapter 7 options which could save your family thousands of dollars a year.

Always speak to a Chicago bankruptcy lawyer before you move money into a trust or protected savings account prior to filing bankruptcy. Such financial transactions could be considered evidence of possible bankruptcy fraud.

Retirement Accounts

This same exemption also applies to IRAs, pension plans, 401(k)s, and other nest egg retirement accounts. It usually doesn’t matter how high the account balance is. The retirement account exemption usually protects it all. The same rules about possible fraud apply.

Perhaps excluding a house, a retirement account is usually a family’s largest asset. This asset has an emotional value as well. Usually, retirement accounts represent long-term financial security as well as a generous reward for a lifetime of financial responsibility.

Government Benefits

This exemption is especially important for Social Security recipients, as well as those who count on VA disability, workers’ compensation, or other such benefits. Even if the money arrives in monthly allotments, like wage income, it is exempt, much like a retirement or other protected savings account.

Since wage income is normally not exempt, or only partially exempt, it’s usually a good idea to keep government benefits in a separate bank account. This small adjustment eliminates problems due to commingled assets. If exempt and nonexempt property mixes, a Chicago bankruptcy lawyer must deal with some additional issues.

Wildcard Exemption

If one of your valuable assets is not on the protected list, do not fret. Hoosiers may protect up to $10,250 worth of tangible, nonexempt property. Such property includes boats, motor vehicles, and vacation cabins. The monetary limit applies to the amount of equity in the item, as opposed to its fair market value.

A lesser wildcard exemption ($400) applies to checking and other nonexempt financial accounts. So, when people file Chapter 7, they don’t have to have empty checking accounts. 

Count on Diligent Cook County Lawyers

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC.

Resource:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics