When residents of the western Chicago suburbs are considering estate planning, the last thing on their minds might be the filing of a bankruptcy
However, depending on a person’s circumstances, a Chapter 7 bankruptcy may be in their best interests as they move into their retirement years.
Claims do not necessarily die with a person
Debts do not always automatically go away when a person dies. The creditor has an option to file a claim against the person’s estate. A valid claim will get paid first, meaning the person’s loved ones get what is left over.
Likewise, lienholders, including banks and mortgage companies, will still have a right to be paid and may choose to foreclose if payments are not forthcoming.
A bankruptcy may help an Illinois resident preserve some of their wealth
In short, a person who dies while saddled with lots of debt may not be able to pass on much, if anything, in the way of an inheritance. At a minimum, sorting through debts is simply another burden a grieving family may have to face.
Chapter 7 bankruptcy can help a person discharge his or her debts and get a fresh financial start. Depending on the circumstances, bankruptcy could mean that the person has more money to pass along to the next generation.
For example, Illinois residents are allowed to claim certain property as exempt from sale under the direction of the bankruptcy court. Among other things, a person can exempt up to $15,000 in equity in their home, while a married couple can exempt $30,000.
Illinois also allows people to claim a $4,000 exemption per person as a wildcard which can apply to just about any property.
Filing for bankruptcy is not always the best option for a person who is planning for their old age. However, it should be one option discussed with an experienced attorney.