What are Exemptions?
What Are Exemptions and Why Are They Important?
Exemptions are extremely important in a bankruptcy proceeding because they allow you to keep many of your assets and protect these assets from being taken by the creditors. There are federal exemptions and State of Illinois exemptions. While bankruptcy is a federal matter, each State could choose whether or not the State exemptions would apply or the Federal exemptions would apply. Illinois chose to use the State of Illinois exemptions. While a full discussion of the State exemption is a bit beyond our discussion, you can learn more here.
Essentially however, the United States Trustee's job is to take things away from you, as a debtor, sell the asset and distribute the money to the creditors. The instant you file the bankruptcy case, and this is no joke, the United States Trustee's office owns everything you have. This would include the shirt you are wearing as you read this, a paid for car or house, money in the bank and other assets. What saves you in most cases are the State exemptions.
This simply means that as a matter of law, the Trustee cannot take exempt items from you. For example, while you (to coin a phrase) lose your shirt when the case is filed, the exemption concerning clothing immediately comes into play and the Trustee or any creditor is forbidden from taking it from you. If this was not the case, in theory the Trustee would take your shirt, sell it, and distribute the money to the creditors.
Many very important assets are covered by the exemptions such as:
1. ERISA pension plans, 401(k), IRA's and life insurance
3. Equity in your home or cars
4. Household clothes or furnishings
At Illini Legal Services, we offer a free, no-obligation consultation to each of our clients. During your consultation, we will take the time to listen to your financial concerns and assess your case and individual situation. We have five locations to serve you. Contact us today for help!
Illini Legal Services is engaged in the private practice of law and is not a public legal aid agency. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.