Will I Be Required to Turn Over Assets in a Chapter 7 Bankruptcy?

 Posted on March 17, 2022 in Bankruptcy

Debt is an issue that affects people throughout the United States, and there are many reasons that a person may struggle to repay the debts he or she owes. For example, a person may experience financial difficulties due to being laid off from his or her job, or a family member may suffer from a serious illness that leads to unexpected medical expenses. While most people will do everything they can to make ongoing payments toward their debts, this can sometimes become impossible. If a person misses payments or defaults on a loan, creditors may begin taking action to collect the amounts that are owed. 

People in these situations may be considering bankruptcy, which will allow them to eliminate certain types of debts and regain financial stability. In many cases, a person will pursue a Chapter 7 bankruptcy, since this will allow debts to be discharged fairly quickly. However, this type of bankruptcy may require a person to turn over certain assets that he or she owns. Those who are considering this option will need to understand what types of assets may be liquidated during bankruptcy and what exemptions may apply.

Exemptions in Chapter 7 Cases

A Chapter 7 bankruptcy is known as a “liquidation bankruptcy,” since a person may be required to surrender certain assets, which will be liquidated to pay creditors some of what is owed. However, exemptions apply to some types of property, and a person will only be required to turn over assets that are non-exempt. In Illinois, exemptions to liquidation in a Chapter 7 bankruptcy include:

• Homestead exemption - Up to $15,000 of equity owned in a person’s home may be exempted for a single person, and a married couple may exempt up to $30,000.

• Wages - Either 85 percent of a person’s gross income or a weekly income of 45 times the federal hourly minimum wage (whichever is higher) may be exempted.

• Motor vehicles - Up to $2,400 of equity owned in a motor vehicle (or $4,800 for a married couple) may be exempt from liquidation.

• Books, tools, and equipment - The tools of a person’s trade that are worth up to $1,500 may be exempted.

• Retirement accounts and pensions - Generally, any funds that have been saved in a retirement account such as a 401(k) or IRA or pension benefits that a person is entitled to receive are exempt.

• Life insurance - Benefits payable following the death of a person covered by a life insurance policy and the aggregate cash value of life insurance policies are generally exempt.

• Public benefits - If a person receives benefits through Social Security, unemployment compensation, veteran’s benefits, disability benefits, or other forms of public assistance, these payments will be exempt from liquidation.

• Financial support - Spousal support received following divorce or child support that is paid to a person to provide for the needs of his or her children are exempt.

• Other personal property - A person’s clothing, school books, family pictures, and prescribed health aids will be exempt.

• Wildcard exemption - An additional exemption may be used for up to $4,000 of personal property that does not fall within other exemptions.

Contact Our McHenry County Chapter 7 Bankruptcy Lawyer

If you have questions about whether you are eligible to file for Chapter 7 bankruptcy or what types of property you will need to turn over in these cases, Thomas Law Office can provide the legal help you need. We will work with you throughout the bankruptcy process to ensure that you receive relief from your debts. Contact our Kane County bankruptcy attorney today by calling 847-426-7990.

Sources:

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=073500050HArt%2E+XII&ActID=2017&ChapterID=56&SeqStart=80800000&SeqEnd=101100000

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics