Assets Commonly Exempt in Liquidation Bankruptcies

If you are considering personal bankruptcy in Illinois, you might already know that there are two general kinds of bankruptcy for consumers: liquidation bankruptcy and reorganization bankruptcy. In a liquidation bankruptcy, all non-exempt assets belonging to a debtor will be liquidated as part of the bankruptcy process. Which assets are commonly exempt from liquidation? Our Oak Park bankruptcy attorneys can provide you with more information.

Liquidation Bankruptcy Versus Reorganization Bankruptcy

Before we explain what assets are exempt in liquidation bankruptcies, it is important to understand what a liquidation bankruptcy is and how it compares to other types of consumer bankruptcy. With a liquidation bankruptcy — the type of bankruptcy that many people think about when they imagine a bankruptcy case — the debtor’s non-exempt assets are liquidated so that creditors can be paid and the debtor’s eligible debts can be discharged. Consumers who file for liquidation bankruptcy file for Chapter 7 bankruptcy. Reorganization bankruptcies are different and do not require liquidation of any assets, non-exempt or exempt.

Rather than liquidating non-exempt assets in a reorganization bankruptcy case, debtors make regular payments over a lengthy period of time to repay creditors, restructure their debt, and exemptions can be used as a factor in determining the amount of regular payments. Reorganization bankruptcies are usually Chapter 13 bankruptcies for consumers, but they can occasionally be Chapter 11 bankruptcies or, in some cases, Chapter 12 bankruptcies (for certain small business owners).

Exemptions You Can Anticipate in Illinois

When you do move forward with a liquidation bankruptcy as a consumer — which typically requires you to pass the “means test” to prove your eligibility — you can expect that a wide range of your assets will be classified as “exempt.” This means those exempt assets will not be subject to liquidation, and you will be able to keep them while still receiving a discharge of eligible debts. Exemptions available to debtors in Oak Park and throughout the Chicago area are provided under Illinois law. Examples of common exemptions include but are not limited to:
  • Homestead exemption, through which you can exempt up to $15,000 of equity in your primary residence;
  • Motor vehicle exemption, which allows you to exempt up to $2,400 in a car, truck, or another motor vehicle;
  • Exemption for the amount of alimony, child support, or spousal maintenance that is reasonably necessary;
  • Disability benefits are generally exempt;
  • Unemployment benefits are generally exempt;
  • Most pensions are exempt;
  • Many retirement accounts, including 401(k) accounts and IRAs, are exempt;
  • Personal property exemption, which allows you to exempt certain personal property such as clothes necessary for wearing, family photos, and certain education savings;
  • Tools of the trade are exempt up to $1,500;
  • Wages are exempt up to 85 percent of your gross earnings or 45 times the federal minimum wage; and
  • Wildcard exemption, which allows debtors to exempt any property of their choosing up to $4,000 in value.
There are additional exemptions that you may be eligible for under Illinois law, as well. You should discuss your particular situation with a bankruptcy attorney to learn more about common and less common exemptions that may apply to you.

Contact an Oak Park Bankruptcy Attorney

Do you want to learn more about exemptions or about filing for Chapter 7 bankruptcy? One of the experienced bankruptcy lawyers in Oak Park at our firm can speak with you today about your financial circumstances. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

Checklist for a Chapter 7 Bankruptcy

Top Things to Consider About Student Loans and Bankruptcy

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