When you file for bankruptcy, does the court take every possession you own to pay your debts? The answer is the court will never take everything you own, but you may lose some of your most valuable possessions and anything that isn’t exempt under bankruptcy law.
One of the most-asked questions regarding bankruptcy exemptions is whether a homeowner will lose his or her home when filing for bankruptcy. While no lawyer can guarantee a debtor will keep his or her house after bankruptcy, bankruptcy law includes something called the “homestead exemption,” which a homeowner can use to exempt property from seizure during the bankruptcy process.
Legal website Nolo explains:
“Under the Illinois exemption system, homeowners may exempt up to $15,000 of their home or other property covered by the homestead exemption.
The Illinois homestead exemption requires that you be a legal owner of record to claim the exemption, meaning your name is listed on the deed to the property.”
Married couples who file bankruptcy together receive double the exemption amount, which adds up to $30,000 of equity in the home. Not all couples will want to file as a couple, and couples should always consult with a lawyer before deciding to file for bankruptcy together.
A surviving spouse may also qualify to keep equity in the home as long as that spouse lives in the home once owned by his or her partner. Children of someone who filed for bankruptcy would also qualify to protect the home until they reached the age of 18.
What Property Does the Court Need to Know About During Bankruptcy?
Although the court will allow a debtor to keep some possessions that he or she must use every day – things like clothing and personal items – the court’s bankruptcy trustee will usually sell items of great value like financial assets and expensive vehicles.
Some of the items a debtor will need to tell the court about include real estate, vehicles, household items, financial assets, and commercial or business assets.
Advice website lawyers.com explains further:
“When you account for your property on Schedule A/B, you’ll also include the value of the asset. Not all property values are assessed in the same way, however. For example, you’ll use the ‘retail replacement value’ (the amount of money needed to replace an item of the same age and condition) for household items and the ‘fair market value’ (the price your home would bring on the real estate market) for property.”
The type of bankruptcy filed will also determine the fate of any property not exempt under bankruptcy law.
Chapter 7 bankruptcy will result in the sale of property with the proceeds given to creditors. Chapter 13 bankruptcy can result in a debtor keeping all of his or her property, but only if he or she can complete a payment plan to repay unsecured creditors.
How Do You File for a Homestead Exemption in Illinois?
Not to be confused with the exemption granted to some homeowners regarding their property taxes, the homestead exemption as it relates to bankruptcy in Illinois is automatic. Unlike certain other states, there is no need to file a homestead declaration to exempt property during bankruptcy.
Further information about the homestead exemption can be found within the Illinois Code of Civil Procedure. While it may benefit a debtor to become familiar with this code, a bankruptcy lawyer is the best source of information in deciphering the walls of text often featured in a state’s code.
Do You Need Assistance from a Bankruptcy Lawyer in Illinois?
Have you decided to sell your home and need a real estate lawyer? Are you considering bankruptcy and need a bankruptcy lawyer? Do you want to fight an unscrupulous debt collector and require the help of a debt collection lawyer? Contact Suburban Legal Group for expert legal assistance.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.