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Is This Item Exempt from Chapter 7 Liquidation?

Posted on in Chapter 7 Bankruptcy

Is This Item Exempt from Chapter 7 Liquidation?

If you have filed for Chapter 7 bankruptcy, you know that you will need to have your nonexempt assets liquidated to come up with the money to repay your creditors. This is done under the supervision of your court-appointed trustee, whose job is to recover as much money from you as possible to pay off your creditors. In exchange for this liquidation, your debts are forgiven.

Liquidation means that any assets that are not deemed to be necessary for your day-to-day life may be sold. Sometimes, disputes can arise about whether a particular item may be exempted or not. This is why you need to work with an experienced bankruptcy lawyer who can protect your interests.

Which Items are Exempt from Liquidation?

Under Illinois law, the following may be exempted from a Chapter 7 liquidation:

  • Up to $2,400 of the value of a motor vehicle;
  • Family photos;
  • Clothing for regular wear;
  • Religious texts;
  • School books;
  • Wrongful death recoveries;
  • Prepaid tuition trust funds;
  • Prescribed health aids;
  • Up to $1,500 worth of work tools, including professional books;
  • Unemployment compensation;
  • Workers' compensation payment;
  • 85 percent of one's gross earnings from a job;
  • Veterans' benefits;
  • Retirement funds;
  • Insurance benefits;
  • Fraternal society benefits;
  • Liquor permits;
  • Spousal maintenance received, as deemed to be a reasonable amount;
  • Up to $15,000 worth of equity in the filer's residence; and
  • Compensation received as the victim of a crime.

Certain other assets may be exempted, as well. If you are considering filing for Chapter 7 bankruptcy or if you have already done so, discuss all of your exemption options with your lawyer.

Handling Exemption Disputes

Sometimes, a dispute can arise about whether an item should be exempt from Chapter 7 liquidation or not. This can require your attorney to prove to the court that you need that item and that liquidating it would cause you to suffer hardship. For example, an Illinois court recently ruled that a woman who had filed for Chapter 7 bankruptcy could keep her antique copy of the Book of Mormon because the book could be counted as a bible. Her trustee argued that the woman had multiple copies of the Book of Mormon and that the antique copy, valued at up to $50,000, would be better used to repay her debt than to make her daily devotions. However, because the book could be counted as a bible and the woman could use it for devotions if she wanted to, the court allowed her to keep it.

Work with a Chicago Bankruptcy Attorney

If you are facing the prospect of filing for bankruptcy, do so with guidance from an experienced Illinois bankruptcy attorney. Our team of bankruptcy lawyers at Newland & Newland, LLP, can answer your questions about bankruptcy and help you navigate this difficult process. Start working with our team by scheduling your free legal consultation with a member of our firm. We are located in Suite 3700 of the prestigious 180 N. LaSalle Street building in Chicago.

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