Potential clients frequently ask this South Chicago Heights bankruptcy lawyer, will I get to keep my house and car?In a Chapter 7 bankruptcy case, most clients are filing a Chapter 7 bankruptcy to eliminate miscellaneous unsecured debt such as credit cards, medical bills, personal loans, past-due utility bills, auto repossession deficiencies and all other debts for any type of service. If you have a house, the attorney is going to make sure before he files that Chapter 7 bankruptcy case, that you will not lose that house. Each state allows a certain amount of equity and property that you can protect free and clear while going through a bankruptcy case. In Illinois, the exemption or the amount that you can protect from creditors in an Illinois bankruptcy case is $15,000 worth of equity in real estate. That is for an individual bankruptcy case. If you are filing a joint bankruptcy case under Chapter 7, then you can protect up to $30,000 worth of equity in your home.
Now, if you exceed $30,000 worth of equity, there still is a chance that you will be able to keep your home because the trustee has to figure what it would take to sell that house. There are real estate fees, there are taxes, there is transfer tax, there is administration and there are broker’s fees. If, after the sale of the property and after paying you your exemption amount of either $15,000 or $30,000, there is nothing left for the benefit of creditors, then the trustee is not going to be interested in selling that property.
If, on the other hand, you have far more than $15,000 or $30,000 worth of equity, then the trustee may very well try to list that property for sale to see what it can sell for so that there may be a benefit for unsecured creditors. If that’s the case, a good Chapter 7 bankruptcy attorney is going to ask you to sign a potential asset acknowledgment or some other form of paperwork that indicates that you are aware if there is a possibility that your trustee may want to inquire or sell the property for the benefit of creditors.
In many cases, real estate values especially today have been dropping so trustees have not been interested in properties. But several years ago and I am sure in the future trustees will once again start to pursue property for the benefit of creditors.
Some clients are willing to take the risk because their debt is so extreme that they are willing to take the risk that they may lose the property in exchange for their fresh start. If someone has $75,000 or $150,000 worth of miscellaneous debt and they have a real estate property that may have $10,000 or $20,000 of unprotected equity, that person might be willing to risk losing the property, getting paid their exemption amount in exchange for their fresh start. That is the case of a true Chapter 7 liquidation where there actually is some property to liquidate and pay unsecured creditors or secured creditors a pro rata share of the proceeds. However, only creditors who make a bankruptcy claim and file it timely can share in the proceeds.