If you are a homeowner in Illinois who is struggling with debt and considering filing for bankruptcy, you may be worried about losing your home and vehicle. Depending on your situation, you may be able to keep your property and get a fresh start.
Two main types of bankruptcy
If you are eligible for it, Chapter 7 bankruptcy can wipe out most of your unsecured debts. These include credit card debts and medical bills. However, in exchange, you may have to surrender some of your nonexempt assets to a trustee who will sell them and distribute the proceeds to your creditors.
Chapter 13 is a reorganization bankruptcy that allows you to keep your property and pay back some or all your debts through a repayment plan that lasts 3-5 years.
In Illinois, you can protect some of your property from being taken by the trustee or creditors by using the state’s exemption laws. Exemptions are categories of assets that you can keep up to a certain value or amount.
For example, Illinois allows you to exempt up to $15,000 of equity in your primary residence and up to $2,400 of equity in one motor vehicle, which is the difference between what you owe and the home and car’s value.
Chapter 7 bankruptcy property protection
If you file for Chapter 7 bankruptcy and your home and vehicle are worth less than or equal to the exemption amounts, you can keep them if you continue to make your loan payments. If your home or vehicle is worth more than the exemption amount, the trustee may sell them and give you the exempt portion of the proceeds. However, if the trustee determines that selling them would not generate enough money to benefit your creditors after paying off the liens and costs of sale, they may let you keep them.
Chapter 13 bankruptcy property protection
If you file for Chapter 13 bankruptcy, you can keep your home and vehicle regardless of their value if you can afford to make your loan payments and your repayment plan. In Chapter 13, you must pay back at least the value of your nonexempt assets to your unsecured creditors through your plan. This means if your home or vehicle is worth more than the exemption amount, you may have to pay more to your creditors than you would in Chapter 7.