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How Can I Protect My Assets from Being Liquidated in a Chapter 7 Bankruptcy?

Posted on in Arlington Heights Bankruptcy Lawyer
How Can I Protect My Assets from Being Liquidated in a Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is known as liquidation bankruptcy because it involves the liquidation of the filer's non-exempt assets to make a profit, which is then used to repay the filer's creditors. Naturally, nobody wants to have his or her assets liquidated, but when an individual files for Chapter 7 bankruptcy, his or her creditors need to recoup at least some of their money.

Talk to your lawyer and your bankruptcy trustee about the liquidation process before it begins. Go over which assets are exempt from liquidation, which are not, and how you can convert certain assets so they are exempt from liquidation.

Know Which Assets are Exempt from Liquidation

Each state has a slightly different list of exempt items and values for each. In Illinois, individuals are permitted to keep up to $15,000 in personal injury recoveries, up to $2,400 of equity in a motor vehicle, up to $15,000 of equity in one's housing under the homestead exemption, as well as other exemptions like personal clothing and photographs. Money certain retirement accounts, pensions, college savings plans, and those received through public benefits and spousal or child support are exempt from liquidation. Proceeds from the sale of exempt assets are also exempt from liquidation during bankruptcy.

Talk to Your Lawyer About Asset Conversion

Asset conversion is a legal process that bankruptcy filers can use to convert non-exempt assets into exempt assets. As long as it is done in good faith, which the court has the discretion to determine, it is acceptable. Basically, it works by spending non-exempt money on exempt items. Familiarize yourself with Illinois' bankruptcy exemptions so you can allocate funds toward these types of assets.

Do Not Attempt to Defraud Your Creditors by Hiding Assets or Making Illegal Transfers

When you are working with your lawyer to complete an asset conversion, it is important that you do not commit a fraudulent transfer. This is the transfer of assets to another individual or a company in an effort to keep a bankruptcy trustee or creditors from accessing them during the bankruptcy process. Committing a fraudulent transfer can jeopardize your bankruptcy case and potentially result in the assets being transferred back to you so your bankruptcy trustee can liquidate them to satisfy your debts. Talk to your lawyer about how to avoid inadvertently committing a fraudulent transfer and what you can do to ensure that all asset conversions before your bankruptcy are made in good faith.

Work with an Experienced Itasca Bankruptcy Lawyer

If you are facing the prospect of having to file for Chapter 7 bankruptcy, first speak with one of the experienced bankruptcy lawyers on our team at Newland & Newland, LLP. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas. We can answer any questions you have about the liquidation process and what you can do to hold onto your assets.

(image courtesy of Ben Garratt)

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