What Can I 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, veteran’s 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%|