Illinois Bankruptcy Exemptions

Like all states, Illinois has a set of exemptions you can use to protect property when filing for bankruptcy, such as a home, car, and retirement account. In this article, you'll learn:

• how long you must live in Illinois before using its exemptions
• whether Illinois exemptions will protect all of your property, and
• what will happen to any property you can't exempt.

If you have more questions, read How to File Bankruptcy in Illinois. Not only will you find answers, but it includes helpful checklists and a link to an interactive bankruptcy quiz. Or, try the start-to-finish bankruptcy guide, What You Need to Know to File for Bankruptcy.

How Illinois Bankruptcy Exemptions Work

You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.

• In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
• In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.

The different approaches ensure that creditors receive the same amount regardless of the chapter filed.

When You Can Use Illinois Bankruptcy Exemptions

You can file for bankruptcy in Illinois after living there for more than 180 days. However, you must live in Illinois much longer before using Illinois exemptions—at least 730 days before filing, to be exact. Otherwise, you'd use the previous state's exemptions.

But, suppose you weren't living in any particular state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).) Learn more about filing for bankruptcy after moving to a new state.

Illinois Bankruptcy Exemption List

Here are some of the Illinois bankruptcy exemptions that bankruptcy filers often use. Spouses can double the exemption amount if they both own the property and file a joint bankruptcy case. Other exemptions you can use in addition to Illinois's exemptions include:

• the federal nonbankruptcy exemptions, and
• the federal COVID-19 recovery rebate exemption (protect stimulus payments, tax credits, and child credits in bankruptcy).

Unless otherwise noted, all law references are to the Illinois Compiled Statutes (ILCS), which you'll find on the Illinois General Assembly website.

Illinois Homestead Exemption

You protect the equity in your residence using the Illinois homestead exemption up to $15,000. Residence can include a farm, mobile home, lot with buildings, condominium, or cooperative. This exemption also protects proceeds from the sale of a homestead for one year. (735 ILCS 5/12-901, 902, 906.) You might also be able to protect more equity if you hold your residence as tenants by the entirety. (735 ILCS 5/12-112.)

Illinois Motor Vehicle Exemption

The motor vehicle exemption protects equity in an automobile. You can exempt up to $2,400 in one motor vehicle. (735 ILCS 5/12-1001(c).)

Illinois Wildcard Exemption

If an exemption doesn't cover the personal property you'd like to keep (not real estate), you can make up the difference using the wildcard exemption. Or, you can use it to protect a luxury item you couldn't protect otherwise. The Illinois wildcard is $4,000. (735 ILCS 5/12-1001(b).)

Other Illinois Exemptions

Alimony, Support, and Maintenance

You can exempt the amount reasonably necessary for support. (735 ILCS 5/12-1001(g)(4).)

Cemeteries and Burial Funds

You can exempt all pre-need cemetery sales and future care funds. (225 ILCS 45/4a; 760 ILCS 100/4; 815 ILCS 390/16.)

Claims for Negligence or Tortious Conduct

You can exempt a payment made to you based on the wrongful death of a person who was your dependent to the extent reasonably necessary for your support. Further, you can deduct a personal injury award up to $15,000. (735 ILCS 5/12-1001(h)(2),(4).)

Franchise, Permit, and License Interests

You can exempt your liquor permit. (235 ILCS 5/6-1.)

Fraternal Benefit Society Benefits

All fraternal benefit society benefits are 100% exempt. (215 ILCS 5/299.1a.)

Insurance Benefits

Life insurance, annuity proceeds, or cash value if the beneficiary is insured's child, parent, spouse, or another dependent. ( 215 ILCS 5/238; 735 ILCS 5/12-1001(f).)

Life insurance proceeds to a spouse or dependent of a filer to the extent needed for support. (735 ILCS 5/12-1001(f),(h)(3).)

Health, disability, or unemployment benefits. (735 ILCS 5/12-1001(g)(3).)

Partnership Property

Illinois has enacted the Uniform Partnership Act, which exempts a partner's interest in specific property. (805 ILCS 205/25.)

Pension and Retirement Benefits

Pensions for various types of employees, including police, General Assembly, firefighters, municipal employees, city, county, and state employees, laborer and retirement board employees, park employees, sanitary district employees, state university employees, teachers, judges, correctional employees, and public library employees. (40 ILCS 5/2-154; 5/3-144.1; 5/3-135/; 5/5-218; 5/6-213; 5/7-217; 5/8-244; 5/9-228; 5/11-223; 5/12-190; 5/12-704; 5/13-213; 5/13-805; 5/14-147; 5/15-185; 5/16-190; 5/17-161; 5/19-117; 5/19-218; 5/22-230; 735 ILCS 5/12-704; 735 ILCS. 5/12-1006.)

Qualified retirement accounts (such as 401ks and IRAs) are exempt. (735 ILCS 5/12-1006.) They are also exempt in every state according to federal law, regardless of the exemption scheme used. For current amounts, see Your Retirement Plan in Bankruptcy.

Personal Property

You can exempt the following personal property: necessary wearing apparel; bible and school books; family pictures; professionally prescribed health aids; a certificate of title to any watercraft over 12 feet in length; prepaid tuition trust fund; Illinois College Savings Pool accounts invested more than one year before filing if below federal gift tax limit, or two years before filing if above. (625 ILCS 45/3A-7(d); 735 ILCS 5/12-1001.)

Public Assistance

All public assistance is 100% exempt, including the earned income tax credit and child tax credit, but only if you have not yet received the funds. (305 ILCS 5/11-3; 735 ILCS 5/12-1001. (In re Fish, 224 B.R. 82 (Bankr. S.D. Ill 1998); In re Vasquez, No. 13-32174 (Bankr. N.D. Ill 2014).)

Trade Implements

You can exempt $1,500 in all tools of your trade, including professional books. (735 ILCS 5/12-1001.) National Guard uniforms and guns are also exempt. (20 ILCS 1805/10.)

Unemployment Compensation

You can exempt 100% of all unemployment compensation except for certain child support claims. (735 ILCS 5/12-1001; 820 ILCS 405/1300.)

Wages

You can exempt the following amount of your wages: 85% of your gross earnings or 45 times the federal minimum hourly wage per week, whichever is greater. (735 ILCS 5/12-803; 740 ILCS 170/4.)

Workers' Compensation

All workers compensation is 100% exempt, including claims and awards for occupational diseases. (820 ILCS 305/21.)

Veteran's Benefits

All veteran's benefits are 100% exempt. (735 5/12-1001(g)(2).)

Confirming the Status of Illinois Bankruptcy Exemptions

Illinois's exemption amounts are adjusted periodically and could have changed since the last update of this article. It's important to be sure you have the most recent figures by checking the Illinois General Assembly or consulting with a local bankruptcy lawyer.

Updated April 23, 2021