An exemption is a law that allows you to protect property during bankruptcy. By exempting an asset, the trustee will not be able to sell your asset to pay your creditors. When you file for bankruptcy in Illinois, property that falls into a certain category may be protected. At the Bankruptcy Center of Illinois, our DuPage county bankruptcy attorneys are knowledgeable regarding bankruptcy exemptions and how they may apply in your case. Our goal is to get ahead of your debt, and we can help you retain your assets and property in the process.
Using an exemption during bankruptcy proceedings is a way to protect that asset. In some situations, the entire asset may be protected, and in other cases part of the value is protected. Exemption limits apply to equity in the property. Equity refers to the difference between the property value and the amount owed on the property. For instance, a car that is worth $4000 and has a loan of $3000 has an equity value of $1000.
Exemptions may apply to the specific property, such as your primary residence for the homestead exemption or the motor vehicle exemption. Not all property is covered by exemptions. Typically, necessities will be covered, while jewelry, sports cars, or vacation homes may not.
Illinois maintains a set of exemptions that apply in Chapter 7 or Chapter 13 bankruptcy. Residency requirements apply, and a recent move may affect exemptions particular to your case. If you have lived in Illinois for over two years, state bankruptcy exemptions apply to your filing. Also, married couples may file jointly in order to claim a full set of exemptions.
The homestead exemption provides for debtors to protect equity in their principal residence. This may include a farm, lot with buildings, condominium, or mobile home. When a married couple files jointly, they can double the exemption.
When a homestead exemption applies to the entirety of your equity, a trustee cannot sell your home under a Chapter 7 bankruptcy. If you have filed for Chapter 13 bankruptcy, you will be paying debts under a repayment plan and can likely keep your home as you exempt some of your equity.
If you have more equity in your home than is provided by the exemption, you may lose your home. Under Chapter 7 bankruptcy, the trustee sells non-exempt property. A home with non-exempt equity may be sold, and then the mortgage holder will be paid because they are a secured creditor. Following their payment, the debtor will be reimbursed for the amount of their homestead exemption, and remaining funds will be distributed to pay unsecured debts. However, you may be able to claim additional exemptions, applying that to the remaining equity. It may also be possible to strike a deal with the Chapter 6 trustee.
A motor vehicle exemption provides for protection of equity in a car. This exemption applies when you are currently making payments for your vehicle. You must compare the amount of the exemption to the amount of equity in the vehicle. Assessing the fair market value of the vehicle is important because a bankruptcy trustee may ask you to make clear the value of the car.
If the equity in your vehicle is covered by the exemption, you will likely keep your car during bankruptcy. If there is equity left over after the exemption applies, under Chapter 7 bankruptcy your car will be sold and after a loan is paid, you will be reimbursed for the amount under the exemption. A debtor may be able to work with the trustee to purchase the vehicle from the estate.
The wildcard exemption can be applied to different types of property. This is an exemption that protects value of property up to a certain amount.You can apply the wildcard exemption to an item that does not have a specific exemption, or you can stack it with another exemption to more fully cover that asset.
There are other exemptions that can apply in your case, including those that affect wages and pensions. Various pensions are exempt, as are tax-exempt retirement accounts. Personal property is usually exempt as well, including family pictures and clothing.
A DuPage County exemption lawyer will sit down with you, review your property, and work to apply exemptions. At the Bankruptcy Center of Illinois, we have decades of combined experience working with clients’ unique financial situations and successfully filing for bankruptcy. Contact our office by phone at (773) 993-0024 or online to set up a free consultation.