Debtors’ and creditors’ rights during a bankruptcy

On Behalf of | Apr 5, 2022 | blog, personal bankruptcy |

There are numerous protections that are guaranteed to debtors and creditors, according to federal and state bankruptcy laws. Debtors do not have to lose everything during a bankruptcy, and creditors cannot take everything that an individual owns. Creditors in Illinois often have to file claims to enforce their rights in bankruptcy courts.

Bankruptcy exemptions in Illinois

A bankruptcy exemption allows you to keep your property and assets during a bankruptcy. In Illinois, the personal items that you keep during a Chapter 7 bankruptcy include land, personal property and vehicles. A filer is allowed to keep clothing, books, personal aids and $4,000 in wildcard exemptions. You are allowed to keep wages that are needed for daily living, including child support, alimony payments, life insurance payments, unemployment benefits, disability benefits and all Social Security benefits.

Rights given to creditors

During a bankruptcy, creditors are given the rights to recover money through secured claims. Secured claims include different types of collateral, such as liens, trusts, property deeds and vehicle or mortgage agreements. Creditors are allowed the value of property liens that are equivalent to the debt or the collateral.

In addition, creditors are given the right to recover unsecured debts, such as credit card debts, medical bills and utility expenses. The creditor has to file an unsecured claim to the bankruptcy court and ask for the debtor’s money to repay a debt.

Bankruptcy laws protect everyone’s rights

The state’s laws, the type of bankruptcy, whether it’s Chapter 7 or Chapter 13, and the types of debts are factors that determine which items are taken from your possession. The most common items that creditors cannot seize include homes, vehicles, furniture, personal belongings and retirement savings.