Your Northfieldbankruptcy attorney is the person who you are going to go to for advice on the subject of debt relief. He is the person who was going to be able to tell you whether or not there is any equity that is at risk and two, whether it’s likely that the trustee is going to try and take that property. Remember, just being above the exemption amount does not necessarily mean that you are going to lose that property. For a piece of property to be administered by a Chapter 7 bankruptcy trustee, the trustee needs to pay you your exemption amount out of the sale. Thus, there has to be significant equity above and beyond your exemption amount to make it worthwhile for that Chapter 7 trustee to sell the property when you file bankruptcy.
Let me give you an example of real estate. Let’s say, the house is worth $300,000 and the amount owed on the house for the mortgage is $275,000. By subtracting the $275,000 mortgage from the market value, which is $300,000, leaves a total equity or ownership of $25,000. In Illinois, an individual can exempt up to $15,000 worth of equity in real estate. Thus, if you take the $25,000 and subtract $15,000 from it, there is going to be $10,000 exposed that a trustee could realistically or potentially administer and sell for the benefit of creditors.
Let’s look at what the trustee has to do though, however, to sell that property after you claim bankruptcy. He needs to hire a realtor and that realtor is going to be paid a commission of anywhere between 3% to 6%. The attorney is also going to have cost of sale on that property, including title fees, attorney’s fees, transfer fees and miscellaneous expenses that have to get paid out at closing. Once you factor in all of those expenses, there is not going to be enough equity or any equity at all for a Chapter 7 trustee to administer. Thus, even though on paper it appears that the debtor has $25,000 worth of equity and he can only protect $15,000, leaving a $10,000 exposure; in reality, the Chapter 7 trustee is not going to sell that property because there would not be any equity after the cost of sale and after the cost of administration.
Now, the example I gave involved real estate which is obviously very difficult to sell and there’s different costs involved. If we look at something like a vehicle, it’s a lot easier to sell a vehicle. There is not a commission fee; there is not a title fee. There is not a transfer fee. And you have to be very careful that if you have a vehicle with equity, a trustee can demand that it be turned over, because the trustee can simply sell it at an auto auction in about one hour. So you have to be very careful depending on what type of property it is. When in doubt, contact your bankruptcy lawyer to learn about possible case scenarios.