Archive for the ‘Bankruptcy Exemptions’ Category

Tax Refunds in Bankuptcy

One of the hottest times of the year for a bankruptcy attorney is tax refund time. That’s because clients usually use their tax refunds to pay their attorney’s fees, both in Chapter 13 bankruptcy and in Chapter 7 bankruptcy.

Why Should I Use My Refund to Pay For My Bankruptcy?

The simple reason is that this is one of the best ways you can spend the money. Instead of going to the casino, or to the movies, you can potentially take your tax refund and discharge thousands of dollars of debt. No more credit card payments! All with one check.

Secondly, if your tax refund is substantial, lets say anything more than $4000 you may not be able to protect anything more than that amount with your Illinois Bankruptcy Wildcard Exemption, which is capped at $4000. The Wildcard Exemption protects any asset in your possession, including your furniture, what you have in the bank and even your television, but only up to $4000. This means that in a Chapter 7 bankruptcy the trustee could potentially seize your tax refund and distribute it to creditors. Which means it makes much more sense to pay your attorney with those funds, especially if its a sizable refund. You must carefully plan your bankruptcy exemptions with an experienced attorney to protect your tax refunds. I have seen bankruptcy trustees ask for debtors to turn over the entire refund check in the middle of the 341 meeting!

In a Chapter 13 tax refunds are now factored into the means test, which means that the amount you receive back as a refund is considered part of your income for Chapter 13 planning purposes. It also may still be considered an asset on the schedules, depending on when you file, how much it is, and how your trustee sees the facts of the case.

To speak with a knowledgeable Chicago Bankruptcy Attorney around tax time about your strategy to protect your refund call Attorney Steven Grace for a free consultation at 312-493-6912.

Tenancy by the Entirety Deed in Bankruptcy

Illinois has opted out of the Federal Bankruptcy Exemptions, so we have our own set of exemptions that were passed by the Illinois Legislature. By default, we have a homestead exemption of $15,000 per debtor for occupied residential real estate in Illinois. This means, that in a bankruptcy, a debtor would only be able to protect $15,000 of equity per filer, so if there are two debtors that amount increases to $30,000.

Recently I had a case where a house was jointly owned by husband and wife, and the deed was titled in the form of Tenancy by the Entirety. This is a very interesting quirk in the Illinois Bankruptcy Exemption Law because if the spouse if not a filer in the current bankruptcy then her assets are not under the jurisdiction of the Bankruptcy Court and cannot be distributed to creditors by the trustee. In order for a title to be held in Tenancy by the Entirety the parties owning the property must be married when they originally took title to the home. In addition, this adds extra protection from creditors. Creditors may typically only come after the house if both spouses are indebted to the creditor in collections, not just one or the other spouse.

How it Works in Bankruptcy

In bankruptcy, the application is similar. If just one party files for the bankrputcy, as a married individual. 100% of the value of the property is exempted in the bankruptcy. That means, that no matter the value of the home, the trustee will be unable to liquidate a property that is held by tenancy in the entirety. This is very important for married couples that are contemplating purchasing real estate. The difference between a Tenancy by the Entirety Deed and a Tenancy in Common Deed is immense from a collection standpoint and could be the reason one loses their home later in life.

Chicago Bankruptcy Attorney Steven J. Grace

The intricacies of filing for bankruptcy are immense, especially in cases where there are assets that are subject to liquidation and a good bankruptcy Attorney may be the difference between losing your home (it really does happen). If you would like to speak more about your bankruptcy options, call Attorney Steven J. Grace at 312-493-6912 today.

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At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.