One of the oldest myths is that if you declare Chapter 7 bankruptcy, you will lose everything. This is not true. Under the law, you are allowed to keep certain property, which is called exempt property. In most cases, the debtor will lose very little, if any, of his or her property, as most is considered “exempt property.” Under the law in Illinois, each debtor is entitled to keep up to $15,000.00 in equity in the real estate where he or she lives. If you file a joint petition with your spouse, you can keep up to $30,000.00 in equity in your home. If you have more than $30,000.00 equity in your home, you should discuss a Chapter 13 with your attorney to protect your home.
Also, the law provides exemptions to each debtor of $2,400.00 in a vehicle; $4,000.00 in personal property; $1,500.00 for tools of the trade, and all necessary personal possessions. Current law allows for the protection of all pension and 401K assets while you are able to discharge your debts. The law also allows certain exemptions for personal injury settlements and workers compensation awards. It is important that you advise your attorney about all potential assets which you own so s/he can properly claim the maximum exemptions to protect your property.