I Do Not Want to Lose My Property: Does This Mean I Should Avoid Bankruptcy?

There are so many different misconceptions about bankruptcy on the internet, and these myths also circulate among friends, family members, co-workers, and other acquaintances. One of the most common misconceptions about bankruptcy we hear is that filing for bankruptcy means you will lose all of your assets and will be left with nothing in order to have your debts discharged. This is simply untrue, and it is critical to understand how different types of bankruptcy affect liquidation, and how bankruptcy exemptions can always allow debtors to protect certain types of property. Our bankruptcy attorneys in Oak Park are here to tell you more.

Liquidation Bankruptcy Does Not Mean You Will Lose All of Your Property

First, we want to clarify that, even in a liquidation bankruptcy, you will not lose all of your property. Under U.S. bankruptcy law, Chapter 7 bankruptcy is a type of liquidation bankruptcy, and it does result in non-exempt property being liquidated in order for the debtor to receive a bankruptcy discharge. However, even in this type of liquidation bankruptcy, there are many different assets that are exempt according to Illinois bankruptcy exemptions. For example, in any given Chapter 7 bankruptcy case in which non-exempt assets are liquidated to repay creditors, you can keep a wide variety of assets based on the following exemptions:
  • Up to $15,000 equity in your home through the homestead exemption;
  • Up to $2,400 equity in one automobile;
  • Support of a reasonably necessary amount in spousal support;
  • Unemployment benefits;
  • Pensions;
  • Retirement accounts;
  • Necessary clothing;
  • Bibles and books for school;
  • Family photographs;
  • Health aids;
  • Prepaid college trust funds;
  • Public assistance benefits;
  • Unemployment benefits;
  • Workers’ compensation benefits;
  • Veterans’ benefits;
  • Up to $1,500 in tools of your trade;
  • Up to 85% of your gross earnings; and
  • Up to $4,000 in a “wildcard” exemption that allows you to keep one or two luxury items, or many items that are lower in value up to the $4,000 that are not covered by other exemptions.
Other exemptions also may be applicable to you, and an Oak Park bankruptcy lawyer can provide you with more information about particular exemptions or answer concerns about specific assets you own.

Not All Consumer Bankruptcy Cases are Liquidation Bankruptcies

You should also know that not all consumer bankruptcy cases are liquidation bankruptcies. To be sure, if you decide to file for Chapter 13 bankruptcy, you will be filing for what is known as a reorganization bankruptcy, or a wage-earner’s bankruptcy. In this type of bankruptcy, none of the debtor’s property is liquidated in order to repay creditors. Instead, exemptions help to determine the total amount of money that the debtor will repay over the course of a repayment plan that last typically from three to five years. Once the debtor has completed the terms of the repayment plan, remaining debt can be discharged.

To be clear, assets are not liquidated in this type of bankruptcy. As such, if you file for Chapter 13 bankruptcy, you will not lose any of your property to liquidation.

Learn More from Our Oak Park Bankruptcy Lawyers

Do you have questions about filing for bankruptcy or about bankruptcy exemptions? Our Oak Park bankruptcy attorneys can speak with you today. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

If Bankruptcy Law is Changed, Will it Affect My Current Case?

How Soon Can I File for Bankruptcy Again?

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