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Asset Protection Lawyer in Chicago, Illinois & Wisconsin

Protecting Your Assets

Frequently Asked Questions about Asset Protection in Bankruptcy

Can I give things away to my family or friends?
Absolutely not. This is a fraudulent transfer. Your friends or family could get sued by the trustee to recover any such transfer. And if you tried to hide this sort of transfer, you could lose your discharge in bankruptcy and even be prosecuted and face time in jail.

Can I sell my assets?
You can sell assets for fair market value. You will have to disclose the sale and account for what you did with the sale proceeds.

Can I buy things with my money?
You can buy things with your money. But you have to be very careful about changing assets which are not exempt into assets which are exempt. This could be trouble, especially in Illinois.

Can I spend my money?
You can spend your money but you will have to account for your expenditures, especially if they are not normal expenditures.

Can I set up an asset protection trust?
Asset protection trusts will be treated as fraudulent transfers in Illinois and likely also in Wisconsin. Such trusts must be disclosed.

Can I convert assets to non-liquid assets?
This strategy can be successful but must be exercised with great caution. Consult with your Lakelaw attorney about this and disclose any such action you have taken.

Can I hide assets?
Absolutely not. Failure to disclose all assets is contrary to bankruptcy law. You could lose your discharge and might face criminal charges for doing so.

Can you represent me if I hide assets or fail to disclose items on my bankruptcy papers?
We cannot represent you under these circumstances.

What can I keep protect from Bankruptcy in Illinois

When you file a bankruptcy case, especially a bankruptcy case under chapter 7, we want you to keep as much of your property as possible. We do that by declaring as much of your property to be exempt as is legally possible. We don’t worry very much about property on which you’ve borrowed money. This is especially true when you owe more on the property than it’s worth. Most often, this is the case for car loans. Today, this is all too frequently the case with loans on your house too.

Illinois requires its residents to use Illinois exemptions when they file a bankruptcy case. If you moved to Illinois within the past 2 years, however, the Bankruptcy Code does not allow you to use Illinois exemptions. You then will have to use exemptions of the state you lived in for the most part of the 180 days before that 2-year period. This can get tricky. But we will go over it with you to make sure you select the right exemptions from the right state. If you moved recently, please be sure to tell us about it.

If you take an asset which is not exempt, like cash, and turn it into an exempt asset, like an Individual Retirement Account, within 6 months of filing your bankruptcy, this will be considered a fraud. You could lose your exemption and you might even lose your right to get a discharge in bankruptcy.

One of the worst things you could do before your bankruptcy is to give your assets away, especially to a friend, family, relative or favorite charity. This is fraud. You could lose your right to a discharge. You could even be committing a crime if you do this and don’t disclose it to the bankruptcy court.

Another bad idea before filing your bankruptcy case is to pay back debts, especially to friends, family members or close business associates. Naturally, people want to take care of their friends. But these sorts of payments are considered to be preferential. You have to disclose these payments. If you don’t you could lose your right to a discharge and you might be committing a crime. If the trustee discovers these sorts of transfers, he can sue the person you gave property to or paid back. If you pay back a friend, family or close associate, the trustee can sue that person for payments made as long as a year before you filed your bankruptcy case.

There are steps to be taken when planning for bankruptcy. When you have questions about such matters, please discuss them with us in detail so we can do the best we can for you in your particular unique case.

Bankruptcy Exemptions Permitted Under Illinois Law

Type of Property Amount of Exemption
Residence or homestead of individual including a farm, lot, house, building, condominium, mobile home or cooperative, whether owned or leased $15,000
Necessary wearing apparel, bible, school books and family pictures, prescribed health aids of debtor or dependents 100%
Tenancy by the entireties property 100% exempt except for claims of joint creditor
One motor vehicle $2400
Tools of trade, professional books $1,500
Proceeds and cash value of life insurance policies and annuity contracts payable to dependent of insured 100%
Public benefits, social security, unemployment compensation, public assistance, veterans benefits, disability and illness benefits (including private insurance). Includes earned income tax credit and child care credit. Includes adoption credit 100%
Alimony, support or separate maintenance Amount reasonably necessary to support debtor and dependents
Crime reparation awards 100%
Wrongful death payments as a result of the death of a person who supported the debtor Amount reasonably necessary to support the debtor
Life insurance payments from a policy insuring a person who supported the debtor Amount reasonably necessary to support the debtor and dependents
Payments on account of bodily injury to the debtor or a person who supported the debtor $15,000
Gross earnings or disposable earnings (i.e. gross earnings less deductions required by law 85% of gross earnings or disposable earnings equal to 45 times the minimum hourly wage per week, whichever is greater (this is followed in the Northern District of Illinois, but not the Central District of Illinois)
Proceeds and cash value of life or endowment insurance policy or annuity contract payable to insured’s spouse or dependent 100%
Fraternal Benefit Society benefits 100%
Property held in trust for the debtor where trust is established by somebody else and has spendthrift provisions 100%
Retirement funds (tax qualified plans or plan in good faith established as a tax qualified plan) 100%
529 Educational Savings Account 100%
Cemeteries and burial funds 100%
Liquor licenses 100%

Protecting Your Assets from Bankruptcy in Wisconsin

When you file a bankruptcy case in Wisconsin, especially a bankruptcy case under chapter 7, we want you to keep as much of your property as possible. We do that by declaring as much of your property to be exempt as is legally possible. We don’t worry very much about property on which you’ve borrowed money. This is especially true when you owe more on the property than it’s worth. Most often, this is the case for car loans. Today, this is all too frequently the case with loans on your house too. Wisconsin offers generous exemptions in bankruptcy. In addition, Wisconsin offers you the choice of selecting either Wisconsin exemptions or Federal exemptions. We will analyze your case using both the Wisconsin exemptions and the Federal exemptions to determine which is most favorable to you.

If you moved to Wisconsin within the past 2 years, however, the Bankruptcy Code does not allow you to use Wisconsin exemptions. You then will have to use exemptions of the state you lived in for the most part of the 180 days before that 2-year period. This can get tricky. We will go over it with you to make sure you select the right exemptions from the right state. If you moved recently, please be sure to tell us about it.

Wisconsin bankruptcy courts take a liberal view toward reasonable bankruptcy planning. However, Wisconsin bankruptcy courts have frequently stated that “pigs get fat and hogs get slaughtered” when it comes to exemption planning for bankruptcy. Be very careful about this and consult with an experienced Wisconsin bankruptcy attorney who can guide you through these sorts of tricky and technical issues. You can save a lot of money if you do this correctly. Your bankruptcy can be a complete failure if you are careless with your bankruptcy planning.

One of the worst things you could do before your bankruptcy is to give your assets away, especially to a friend, family, relative or favorite charity. This is fraud. You could lose your right to a discharge. You could even be committing a crime if you do this and don’t disclose it to the bankruptcy court.

Another bad idea before filing your bankruptcy case is to pay back debts, especially to friends, family members or close business associates. Naturally, people want to take care of their friends. But these sorts of payments are considered to be preferential. You have to disclose these payments. If you don’t you could lose your right to a discharge and you might be committing a crime. If the trustee discovers these sorts of transfers, he can sue the person you gave property to or paid back. If you pay back a friend, family or close associate, the trustee can sue that person for payments made as long as a year before you filed your bankruptcy case.

There are steps to be taken when planning for bankruptcy. When you have questions about such matters, please discuss them with us in detail so we can do the best we can for you in your particular unique case.

These are the most important exemptions under Wisconsin law:

Type of Property Amount of Exemption
Homestead $75,000 or the proceeds of sale for up to two years if you plan to buy another house
Insurance Federal disability insurance benefits.
Fraternal benefit society benefits.
Life insurance proceeds for someone debtor depended on, needed for support.
Unmatured life insurance contract (except credit insurance contract) if debtor owns contract & insured is debtor or dependent, or someone upon whom debtor is dependent.
Unmatured life insurance contract’s accrued dividends, interest, or loan value to $4,000 total, if debtor owns contract & insured is debtor or dependent, or someone debtor is dependent on.
Family law related assets 100% of Alimony, child support needed for support
Pensions, retirement benefits Some municipal employees.
Firefighters, police officers who worked in city with population over 100,000.
Military pensions
Private or public retirement or disability benefits, including IRAs and KEOGHs, 401(k), subject to many exceptions & limitations. (don’t worry – most IRAs, 401(k) plans, 403(b) plans and similar plans are excluded from bankruptcy estates under the Bankruptcy Code.)
Public employees
Personal Property Burial plot, tombstone, coffin (husband & wife may double).
College savings account or tuition trust fund.
Fire & casualty proceeds for destroyed exempt property for 2 years from receiving.
Lost future earnings recoveries, needed for support.
Tenant’s lease or stock interest in housing co-op, to homestead amount.
Wages used to purchase savings bonds.
Wrongful death recoveries, needed for support.
Household goods and furnishings, clothing, keepsakes, jewelry, appliances, books, musical instruments, firearms, sporting goods, animals, and other tangible personal property to $12,000 total (husband & wife may double).
Motor vehicles to $4,000 (husband & wife may double; unused portion of $12,000 personal property exemption may be added).
Personal injury recoveries to $50,000.
Deposit accounts to $5,000.
Public Benefit Crime victims’ compensation needed for support.
Social services payments.
Unemployment compensation.
Veterans’ benefits under 45.03(8)(b).
Workers’ compensation.
Wages 75% of weekly net income or 30 times the greater of the federal or state minimum hourly wage; bankruptcy judge may authorize more for low-income debtors.
Wages of county jail prisoners
Wages of county work camp prisoners
Wages of inmates under work-release plan.

Here’s a list of the most important federal bankruptcy exemptions:

Type of Property Exemption
Homestead $22,975 (subject to inflation adjustment)
(unused portion of homestead up to $11,500 may be applied to other property)
Motor Vehicle $3,675 (subject to inflation adjustment)
Household Furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments held primarily for the personal, family or household use of the debtor or a dependent of the debtor $550 per item not to exceed $11,525 in aggregate value – also can utilize any portion of the homestead exemption not utilized by the debtor to protect his or her homestead. (subject to inflation adjustment)
Jewelry held for personal, family or household use of the debtor or a dependent of the debtor $1,450 (subject to inflation adjustment)
Implements, professional books or tools of trade $12,250(adjusted)
Insurance cash surrender or loan value $11,525 (adjusted)
Benefits including social security benefits, unemployment compensation, local public assistance benefit; veterans benefit; disability, illness or employment benefit; alimony support or separate maintenance to the extent reasonably necessary for the support of debtor or debtor’s dependents; stock bonus, pension, profitsharing, annuity or similar plan or contract on account of illness, disability, death, age or length of service (except for certain non-qualified insider plans) 100%
Rights to recover certain payments including: Crime victim’s reparations, wrongful death payments, life insurance contracts of persons of whom debtor was a dependent 100%
Personal injury claims $15,000 (adjusted)
Payment for loss of future earnings of the debtor or an individual of whom debtor is dependent 100% to extent reasonably necessary for support of debtor or any dependent of the debtor
Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under the Internal Revenue Code. 100% (not exempt but excluded from bankruptcy estate)

 


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