Bankruptcy gives debtors in Will County, Illinois, a fresh start, but some consumers hesitate filing because they fear losing everything. In some cases, they are required to relinquish property, but that depends on the type of bankruptcy. Illinois bankruptcy codes allow debtors to protect some of their property using exemptions.
Assets under Chapter 7 and Chapter 13
Consumers commonly file Chapter 13 or Chapter 7 bankruptcy, but each type handles assets differently. Chapter 7 discharges certain unsecured debts, such as delinquent taxes, credit card debt and medical debt. Debtors must sell nonexempt property, or nonessential assets, through a trustee to pay creditors.
Chapter 13 bankruptcy restructures debt into a payment plan the debtor submits to court for approval. The debtor must wait longer for a discharge, but they don’t have to surrender assets as long as they maintain the payment plan. If they fail to make payments on secured property, the lender can still seize it.
Iowa bankruptcy exemptions
Many states allow federal or state exemptions, but some states only recognize state exemptions. An asset must have enough equity, or the difference in the value of the asset and what the debtor owes. Illinois allows debtors up to $15,000 exemption for a residence under the homestead exemption. The amount increases to $30,000 for married couples, each with interest in the residence filing jointly.
Debtors may claim an exemption up to $2,400 for a motor vehicle and wild card exemption of $4,000 for a nonexempt asset. Debtors can exempt certain personal property, such as necessary clothing, family pictures, prescribed health equipment, some work tools and school books.
Some bankruptcy cases are straightforward, but exemption laws often change. A mistake on paperwork can delay a case or get it dismissed, so the debtor should consult an attorney throughout the process.