Is Exempt Property Always Safe In Bankruptcy


One thing a bankruptcy lawyer will always point out to his or her clients is that a certain amount of property is exempt from creditor claims.  Under Illinois law probably the most commonly used exemptions are the $15,000.00 of equity in one’s home, the $2,400.00 exemption for a vehicle, the $4,000.00 general
personal property exemption, and the exemption for qualified retirement savings such as IRAs and
401Ks.

However, some courts have allowed the bankruptcy trustee to take exempt assets away from
debtors under certain circumstances.  One situation that has appeared in several reported cases is
when debtors have improperly failed to disclose certain assets on their bankruptcy petitions.
Although not all bankruptcy courts have agreed with the treatment, some of these decisions have
allowed the trustee to take the debtor’s exempt assets to pay for the damages caused by the
omission.

One should note that omitting assets is generally considered fraud and the courts have
justified this treatment under provisions of the Bankruptcy Code designed to punish misconduct.
Thus hopefully the honest debtor does not need to fear this could happen to him.