Illinois Bankruptcy Exemptions Can Protect Your Assets
One of the biggest misconceptions people have about bankruptcy is that they'll have to give up all of their stuff when they file. A woman in my neighborhood was so terrified that her house would be taken away if she went bankrupt that she (unfortunately) didn't even consider filing as an option. She just let the bills pile up, hoping for a miracle, until - lo and behold - the bank foreclosed on her family's home. Had she tried bankruptcy - the option she feared the most - she'd probably still be living down the block.
Despite sometimes misguided public opinion, of the most appealing features of bankruptcy is its ability to protect assets from creditors, thanks to a long list of exemptions. It's why at DebtStoppers we often tout Chapter 13 as the surest way to stop foreclosure.
Now, I'm not saying that bankruptcy guarantees you can keep all your assets. That depends on your financial situation and the type of bankruptcy for which you're eligible. In Chapter 13, for instance, you can usually retain most of your things - including your home - when you work out an affordable payment plan for remaining debts. Of course, sometimes repayment just isn't an option. Chapter 7, also known as liquidation, is usually reserved for when you don't have the funds to pay creditors. In exchange for discharging the debts, you will sometimes be required to trade certain assets. Fortunately, there are exemptions.
What are exemptions? Each state has its own set of items that are legally protected from repossession. And if you're married and file jointly, you're in luck - your exemptions will double, as you and your spouse can each claim a full set.
Let's look at Illinois, for example. Here, you can exempt up to $7,500 of your home's equity or up to $1,200 of the equity in your car. What does that mean exactly? If the exemption covers the value of the item minus the amount left on the loan, and you can continue making payments on the loan, you're free to keep the item.
This is just one example; there are many more exemptions, from your wages down to family photos and books. In my next post, I'll detail specific rules for Illinois and Georgia.
Keep in mind that these exemptions only apply with bankruptcy. If debt is keeping you from paying for your home or car but you fail to take action, nothing will protect you from repossession. So what are you waiting for? When you sign up for our one-on-one debt analysis, you'll be able to meet with one of our professional bankruptcy attorneys free of charge. Don't wait until it's too late to find out if bankruptcy could save your assets.