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Chicago Bankruptcy Question: What are exemptions in a Chapter 7?

Chicago Bankruptcy Question of the Day: What are exemptions in a Chapter 7 bankruptcy?  Exemptions in a Chapter 7 bankruptcy context are laws that protect equity in property that Congress or the state of Illinois has deemed necessary for people to keep in order to effectively reorganize their financial situation through bankruptcy.  There are a set of exemptions written into the U.S. Bankruptcy Code.  Illinois, however, has elected not to use the federal exemptions and instead use exemptions based on Illinois statutes. 

When you file for Chapter 7 bankruptcy protection in Chicago, you are required to file a series of schedules that detail all of the assets that you own or have a reasonable likelihood of owning in the immediate future (receivables, proceeds from a lawsuit, inheritances, etc.).  Along with the schedules of assets, you are required to file a schedule detailing the exemptions that you believe that you are entitled to in order to protect those assets that you wish to keep.  Any asset that is not exempt or otherwise protected, can be sold by the Chapter 7 bankruptcy trustee in order to pay your bills.  If you fail to properly exempt an asset, the trustee does have the right to liquidate (sell) it.

The most common exemptions are:

The Homestead Exemption:  Each individual who is on title and resides in their primary residence is entitled to a $15,000 exemption.

The Motor Vehicle Exemption:  Each individual who is on title to their vehicle is entitled to one $2,400 motor vehicle exemption.

The "wildcard" Exemption:  Each individual is allowed to exempt $4,000 worth of personal property including, but not limited to, money in the bank, furniture, second vehicles, etc.

Retirement fund exemptions:  There are several exemptions in play here, but the bottom line is that 100% of retirement funds are generally exempt.

Personal injury lawsuit exemptions:  This exemptions protects the first $15,000 in net proceeds from any personal injury lawsuit that the debtor has against another party.

These are only a few of the numerous exemptions that a person filing for Chapter 7 bankruptcy in Chicago is entitled to use.   Proper scheduling of all exemptions that a person is entitled to is imperative in order to protect as many assets as legally possible when that person files for Chapter 7 bankruptcy protection.  A good bankruptcy lawyer understands how to use the bankruptcy exemptions to maximize the protection of assets and may be able to use some exemptions creatively to protect more assets than a less-experienced attorney would.

The Chicago bankruptcy lawyers at Ledford & Wu are intimately familiar with all of the exemptions permitted by law to those who file for Chapter 7 bankruptcy in the Chicago area.  Our attorneys will use every means available to protect your assets.  Call today for a free consultation.

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