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Chicago Bankruptcy Basics: Personal Property

Today's Bankruptcy Basics topic involves the treatment of personal property when filing for bankruptcy protection in Chicago.  This post will not cover the treatment of vehicles, retirement funds, pending lawsuits or income tax refunds, as these specific items are worthy of their own entries, which will follow in the near future.  In bankruptcy, the concept of personal property basically includes everything that you own that is not real estate.  Money in the bank, furniture, clothing, life insurance policies, and all of your "stuff" is included in the general category of personal property. 

When you file for bankruptcy protection, whether it be Chapter 7 or Chapter 13, all of your personal property must be disclosed.  Some easily distinguished items, such as bank accounts and life insurance policies, are scheduled individually.  Others, such as your furniture, household goods and clothing are scheduled as bulk line items.  All of your personal property must be assigned a current "liquidation" value, which is the reasonable value you could expect to receive if you sold the property on the date of filing.  Failure to schedule personal property can lead to loss of the property, denial of your bankruptcy discharge and potentially prosecution for bankruptcy fraud.

This does not, of course, mean that you are going to lose all of your property.  Every debtor who files for bankruptcy in Chicago is entitled to a series of exemptions.  In Chicago, and all of Illinois, these exemptions are based on state laws that are incorporated into the U.S. Bankruptcy Code.  There are some exemptions that have no financial limitations, such as the exemptions for ordinary wearing apparel and life insurance cash value where the beneficiary is a dependant spouse or child.  Most, however, have a fixed limit, such as the general personal property exemption (known as the "wildcard" exemption), which in Illinois is $4,000 per filing party. 

If you file for Chapter 7 bankruptcy protection in the Chicago area, then you must pay close attention to the personal property values and exemptions taken.  Upon filing, a Chapter 7 trustee will be assigned to your case.  The trustee has the right to liquidate (sell) any personal property that is not protected by your exemptions and use the proceeds to pay your creditors.  Most people who file for Chapter 7 bankruptcy do not have any non-exempt property and do not lose anything, however the risk is there.

If you file for Chapter 13 bankruptcy protection in the Chicago area, there is less risk to your property, but you still must be carefull.  Upon filing, a Chapter 13 trustee will be assigned to your case.  One of the jobs of the Chapter 13 trustee is to complete an equity analysis of your property.  Your plan of reorganization must pay enough to your unsecured creditors to protect the non-exempt equity in your personal property.  If it does not, then your plan cannot be approved by the court and your case will fail.

This is why it is essential that you have an experienced bankruptcy attorney representing you through either the Chapter 7 or Chapter 13 process.  A good bankruptcy attorney will take the time to discuss your assets with you, advise you on the available exemptions, warn you of any non-exempt equity in personal property that you may have and help you decide which bankruptcy option is right for you.  The Chicago bankruptcy lawyers at Ledford & Wu all have years of experience preparing and filing bankruptcies and are happy to take the time to offer you a free consultation to discuss your bankruptcy options.  Call us today.

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