bankruptcy illinois exemptions
What eactly does “exemption status” have to do with “equity” in filing Chapter 7 bankruptcy?
Have seen two conflicting answers.
So here is scenario.
Person has home in Illinois. Worth: 179,000.00. Home has 10,000.00 in “equity”. Illinois allows “15,000.00″ in ‘exemption’..for purposes of filers of bankruptcy.
Person wants to file Chapter 7. Mortgage payments are current.
Question?
Does 15,000.00 exemption mean she will lose home? What exactly is “equity” and how does it relate to the exemption status?
Can you please answer in laymen’s terms?
Thank you.
rachaisa….
what an easily understood answer. Thank you so much. btw if you come back, person has about 20,000 in mostly credit card debt I(including about a 2200 dollar balance on her car. She wants to reaffirm the car also. (has never been late on a payment. Does that make a difference? Can she still file a 7?
thank you so much.
In a Chapter 7 bankruptcy, assets are “liquidated” or sold to pay creditors. If the house were ordered to be sold, up to $15,000 of equity would go to the homeowner and the rest goes to the creditors. In this case, there is only $10,000 in equity, so that’s the amount that the homeowner keeps from the sale.
In this case, it is unlikely that the home would be ordered to be sold, because there is no cash coming out of the sale to pay anyone else but the mortgage company. It would be different if the equity was $50,000, because then the additional equity above the exemption (50-15 = $35,000) is available to pay other debts.
