Valuations are very important when filing bankruptcy cases. For instance, if a person looks up their fair market value for their car and sees that the fair market value is $6,000.00, then they have to ask themselves, or the Mundelein bankruptcy attorney must find out what the exemption right is for their motor vehicle and if there is any equity that is involved. So in our $6,000.00 example, a person files bankruptcy or is deciding – or is contemplating filing bankruptcy. That person looks up their exemption rate. In Illinois, the exemption for one car is $2,400.00. Now, that $2,400.00 eats away at that $6,000.00, which is the equity of the vehicle, which is the fair market value. Now, when you subtract the $2,400.00 of exemption to the $6,000.00 of the fair market value, your property for the car is in essence $3,600.00. This is how we arrive at the bankruptcy facts.
So after exemptions are taken, that $6,000.00 car is really worth only $3,600.00. If you’re filing jointly with your spouse, that exemption is going to be added from $2,400.00 plus $2,400.00, which would equal $4,800.00 – $4,800.00. Subtract that from $6,000.00 and you will receive equity of $1,200.00 – $1,200.00.
At this point, the trustee must make a decision, weighing all the bankruptcy options, and that decision is whether or not it is worth it to sell a vehicle with equity after exemptions of $3,600.00 or $1,200.00. Generally speaking, a trustee will not sell the car if it’s $3,600.00 in equity. The reason being is a trustee has to hire an outside source for an attorney to represent them in selling the car, so he has to pay cost to the attorney. He also has to pay something for selling cost and the fair market value does not necessarily mean you will be receiving that price in an auction, or even in a regular sale. That $3,600.00 might actually be bought at a value of $2,500.00, or maybe $3,000.00. In any event, it usually will not be at $3,600.00.
So at that point, the trustee has to take into consideration the amount of actual money that he would receive if he sold the property and the amount of costs that are included with selling that property. At that point, if he receives a net of $1,000.00, it’s usually not enough money for him to waste his time and effort to pay back his your creditors, $1,000.00 pro rata. So when deciding whether or not filing Chapter 7 is good for a person, you really have to look at the equity in your assets, because there is a chance that your car could be liquidated and paid to creditors. However, generally speaking, your car will not be taken in Chapter 7 or a Chapter 13 bankruptcy if you have a decent bankruptcy lawyer.