Illinois residents have likely heard of the concept of filing for bankruptcy. They probably are aware that the process is meant to help people who cannot fully pay their debts, and that they may have to sell some of their assets in order to make partial payments. While this may be true in certain instances, it should be noted that Illinois, as is the case with most states, exempts certain property from being subject to sale in certain types of bankruptcies.
As mentioned above, bankruptcy is supposed to give a filer a fresh financial start by getting rid of certain dischargeable debts. One often-used type of bankruptcy for this purpose is called 'Chapter 7,' also known as a 'liquidation.' In this form of bankruptcy, the trustee will oversee the sale of the filer's property and disburse the proceeds to various creditors based upon a legal schedule of prioritized debt. However, not all the filer's property is subject to sale in this process, as state law pronounces certain amounts of some type of property as 'exempt' from the bankruptcy estate.
These exemptions are meant to allow bankruptcy filers to keep certain things required for a minimum standard of living in the modern world. In Illinois, for example, a filer can keep up to $15,000 of equity in a home (this may or may not mean the house itself can be kept by the filer). Chapter 7 filers can also keep their necessary clothing, up to $2,400 of equity in one vehicle, and up to $4,000 worth of personal property (generally anything other than real estate.) There may also be exemptions for certain types of retirement accounts.
It should be obvious that determining the equity in any particular piece of property is not necessarily easy, and certain special rules are going to apply. Further, what property can be listed as exempt in a Chapter 7 filing may not be clear to everyone. Because of this, people who think Chapter 7 may be right for them may wish to consider contacting an experienced Illinois attorney.