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Chapter 7 is the simplest, fastest form of bankruptcy, discharging filers’ debts within a matter of months. But there’s a catch—the trustee may seize and sell your property in something called a liquidation process.
Fortunately, every state has a list of bankruptcy exemptions. A bankruptcy exemption is a type of property or amount of funds that you can shield from the liquidation process. When you claim an exemption, you can receive a debt discharge without losing that property. Most people file Chapter 7 bankruptcy because, after calculating the value of their assets and other possessions, they determine that they can complete the process without suffering from the liquidation process.
If you file Chapter 7 in Illinois, you will have to use state exemptions. Unlike some courts throughout the country, Illinois bankruptcy courts do not recognize federal exemptions.
You can protect the following from Chapter 7 liquidation in Illinois:
For the above exemptions without a threshold, single filers can claim an unlimited amount.
Although Chapter 13 doesn’t involve a liquidation process like Chapter 7, property exemptions will still play a role in your case.
Instead of selling nonexempt property to repay your creditors, the court in a Chapter 13 case will require you to pay the value of your nonexempt property over the course of your 3-5-year repayment plan. This is because Chapter 13 bankruptcy must give creditors the same amount or more than they would have received through the Chapter 7 liquidation process.
Despite this requirement, Chapter 13 is a good opportunity for those who are willing and able to pay to keep their nonexempt property. Fortunately, your monthly payments will depend largely on your disposable income, which means this plan should (in theory) be reasonable.
What you can—or want—to protect from liquidation will play a significant role in which chapter of bankruptcy you file. If you would like a more personalized evaluation of your financial circumstances, come to Bach Law Offices, Inc., where our attorneys provide services backed by 40+ years of experience. We can answer all your questions and help you make fully informed legal and financial decisions. If bankruptcy isn’t right for your situation, we can help you assess all potential alternatives.