Equity Exemption
Waukegan Illinois Bankruptcy Lawyers & Attorneys
Jesse Barrientes: That’s correct. I think it’s important to note as long as we’re on that kind of score, on that issue, we need to know about the equity in certain things. We talked about the house. As long as you don’t have enough equity you’re okay on that. It’s important to note too that when they passed the Bankruptcy Reform Act in 2005 – October 17th, is that what you said?
David Siegel: That’s correct.
Jesse Barrientes: Oh boy, stuck right in my head there too. They also established certain income levels. So basically you have to – if you earn a certain amount of money, you are presumed that you cannot file a Chapter 7 bankruptcy, which is complete discharge. You have to file a Chapter 13 which is a consolidation. And we’ll talk about that on the next show in fact. But, that’s what’s important. So when you have those issues kind of going on you want to make sure that everything is taken care of. You want to look at your car. Because sometimes people might have – and let me ask you. What’s the exemption for an automobile? What happens, Dave, if I have a car and typically what I see, and I’m sure that’s what you see too, is you have a car that you owe $15 thousand on and it’s worth maybe $10 thousand or $8 thousand. Sometimes you might even have a car that somebody had paid off. So what happens if my car is paid off and it’s actually worth $8 thousand?
David Siegel: Well, we can protect up to $2400 in one vehicle and then you have what’s known as a wild card catch all exemption of $4 thousand that can be put on any type of property other than real estate. So 24 plus the $4 thousand, I could probably protect at a maximum $6400 worth of equity in that vehicle.
Jesse Barrientes: Well let me ask you. In this example I said we had eight. So is the trustee going to sell my vehicle?
David Siegel: No. Because there’s not enough equity. It’s not worth the trustees while to go ahead and list it, sell it, and pay a dividend to creditors. There just wouldn’t be enough there. But if there’s you know, four, five, six thousand, then maybe it’s worthwhile depending on how much –
Jesse Barrientes: And that you have equity in the vehicle.
David Siegel: Right.
Jesse Barrientes: And that applies – then so let’s say I had that car and let’s say I have a Harley Davidson motorcycle that was paid and that was worth $25 thousand. We’d have the same issue there. That’s probably something you’d sell it for.
David Siegel: Right. And anytime we find that someone has that kind of property, we would advise them not to file a Chapter 7 because the Chapter 7 trustee is definitely going to acquire that vehicle or piece of property and liquidate it. And there’s nothing you can do once the trustee finds an asset. You can’t dismiss your case. You don’t necessarily have the right to automatically convert it to a repayment plan under Chapter 13. You have to be very careful that when you file a Chapter 7 you have no significant assets that are going to be taken. And if you do have assets, the Waukegan bankruptcy attorney is probably going to want you to sign an asset acknowledgement form, where you realize there’s a chance that you might lose some property in this Chapter 7 fresh start case.
Jesse Barrientes: So the person doesn’t say later on you never told me this.
David Siegel: Exactly. Or worse. You told me it would be okay. I told you I had a paid off Harley and you told me it wouldn’t be a problem. The trustee wouldn’t want it. So that’s what it is. It’s protection for the attorney to make sure they don’t have any false claims against them.
Jesse Barrientes: So if I inherited Grandpa’s Harley Davidson classic motorcycle right then I’m going to want to make sure that I see what the value is before I do anything like that.
David Siegel: Yeah, and the court’s reasoning is, the trustee’s reasoning is you could liquidate that piece of property and pay your creditors as opposed to just eliminating your debt and keeping that property. So you can’t have your cake and eat it too. You can’t have too much in terms of property. You can’t have too much equity in real estate. You can’t have too much cash on hand or monies on account. It’s for honest debtors who fall within a certain limit in terms of what they make and what they own. Okay? It affords honest debtors a fresh start. That’s what Chapter 7 is all about.
Back to Waukegan Illinois Bankruptcy Lawyers & Attorneys
