Keeping property free and clear when filing bankruptcy as described by a South Barrington bankruptcy lawyer. With regard to a vehicle, the same type of deal applies in terms of equity. In the state of Illinois, an individual is entitled to a $2400 exemption in one motor vehicle. If you are filing a joint case, husband and wife together can each apply their $2400 exemption to protect $4800 worth of equity in a vehicle. In most cases, debtors filing for bankruptcy owe as much or more than what their vehicle is worth. In those cases, there is no problem with the debtor being able to keep the vehicle. The debtor just needs to continue to make their regular monthly payment going forward; otherwise the finance company can repossess the vehicle just like they could before you made the decision to file chapter 7 bankruptcy. The trouble comes when someone has a paid off vehicle that has significant equity. And when I say significant equity, again we have to factor in what it will take to sell that property, what will be available for unsecured creditors, how much can the debtor protect in the vehicle? I mentioned earlier about $2400 exemption for one individual, $4800 exemption for a joint couple.
But I need to also add an additional exemption which can apply. In the state of Illinois, each individual bankruptcy debtor is entitled to a $4000 wild-card exemption that they can place over any kind of personal property. In the joint case scenario, that’s $8000 worth of miscellaneous exemption that can be sprinkled over any personal property. So you can couple the $2400 or $4800 auto exemption and then combine on top of that either the $4000 or $8000 miscellaneous wild-card exemption. So if someone has a vehicle that may have $5000 to $7000 worth of equity, it may be protectable based on the exemption and the wildcard. It really depends on the particular facts of the case.
In my office, we will look up the value on Kelley Blue Book or NADA which are both sources to find out the value of used cars. I have also advised clients to take the car to CarMax or an auto dealer to get a written estimate. I want to know in a close call what that value is going to be. I want to be able to let my client know that there is either no chance or a slight chance or a great chance that that trustee is going to want to take that vehicle in exchange for your fresh start. This could be a huge factor in the question of should I file for bankruptcy? The client can then make an educated decision as to whether or not it’s worth it. If there is equity and if there is a chance that the trustee might take the vehicle for the benefit of unsecured creditors, and then I will have my clients sign a potential asset acknowledgment or other written documentation so that the client knows there is a possibility that they may lose that vehicle.