06 May Do I Qualify For Bankruptcy, Exempt Property Part 5 of 9
In this fifth analysis of your case we examine the application of exemptions to your assets. Each state has a schedule of assets that are protected from collection by your creditors. Additionally, there is a set of federal exemptions. States determine whether either or both may be used. Hence, the laws of exempt property are state specific with a common federal twist.
Once we determine the nature and extent of your assets, we need to establish a fair market value for each item. Next we subtract the amount of any secured liens to calculate property equity. Exemptions are used to protect that equity from the reach of your creditors.
Illinois exemptions can be found in my previous article, If I File Bankruptcy Will I Lose My House Or Car. If you have non-exempt assets you will have to choose between surrendering the asset to the bankruptcy trustee, who will sell the asset; or you will have to purchase the asset from your bankruptcy estate by paying an equivalent amount of money to your trustee. Clients who own motorcycles or boats typically struggle with this decision. What happens to that money? The trustee distributes it in payment of the claims filed by your creditors. Proper bankruptcy planning seeks to minimize the amount, if any, you must pay to your creditors. We want you to keep as much of your money and property as possible under the law.
Debtors with a small amount of non-exempt property may decide to file chapter 7 and purchase this property from the trustee. Debtors with substantial non-exempt property may elect to file chapter 13 and pay an equivalent value in cash spread out over the duration of a case – typically from three to five years.
Andy Miofsky, Esq.
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