Now, if someone is going to lose their house, they are going to receive their exemption amount in the property states Hawthorn Woods bankruptcy lawyer. So in Illinois, for an individual, the exemption amount is $15,000. If it’s a joint filing, the amount of exemption in real estate is $30,000. Thus, if a trustee sells the property, they must give the exemption amount first to the debtors and then any remainder would be available for creditors.
So when a client asks me are you sure I am not going to lose my house? My answer is let’s discuss it. Let’s look at the market value. Let’s look at the amount owed. Let’s look at your exemption and then make an educated decision on whether or not there’s going to be any un-exempt equity that a Chapter 7 panel trustee could take and sell and pay to the benefit of unsecured creditors who file a bankruptcy claim. In 99% of Chapter 7 bankruptcy filings, there is no property whatsoever that the trustee is going to take and sell.
If it looks like it’s a close call, we might want to take a chance because we can always buy out the trustee’s interest to prevent him from selling the property. So for example, let’s say there’s $5000 worth of un-exempt equity in a debtor’s residence. We can offer the trustee $5000 as a buyout if the trustee is interested in selling the property. The trustee doesn’t want to deprive the individual of their real estate; they just have a duty to take whatever is un-exempt and liquidate it for the benefit of creditors. Now, debtors don’t always have that $5000 handy to pay a creditor or pay a trustee however, they might be able to acquire it through some sort of retirement vehicle or through a family member or a friend. These are some of the complications of why you should not try to file bankruptcy yourself.
So basically when I do a Chapter 7 case, I assure my clients that they are not going to lose their real estate, provided they continue to make their monthly payment on those items. In the event where it’s too much equity, I will definitely recommend a Chapter 13. In a Chapter 13, the debtor does not lose the real estate either. The debtor keeps the real estate but has to pay either all or a portion of his debt over time through a Chapter 13 trustee.
The last scenario is if it’s a close call. In that situation, I will have the debtor signed a Potential Asset Acknowledgment and we will talk about the possible scenarios where the trustee may inquire about the property. Remember, the debtor can always do that buyout. The debtor does not have to walk away from the property. The debtor can come up with some funds to pay the trustee his interest in the property so that the debtor does not lose the property. Trust in your attorney and follow his bankruptcy advice. You should be just fine.