Learn how Illinois's bankruptcy exemptions protect your home, car, personal property, and more.
Table of Contents
- How Do Bankruptcy Exemptions Work?
- How Do I Use Illinois Exemptions to Protect Property?
- Will Illinois Bankruptcy Exemptions Protect My Property?
- What Are Commonly Used Bankruptcy Exemptions in Illinois?
- How Do I Find Illinois's Bankruptcy Exemptions?
- What Happens to Property I Can't Exempt in an Illinois Bankruptcy?
- What Are the Differences Between Chapters 7 and 13 Bankruptcy?
- How Long Does it Take to File for Bankruptcy in Illinois?
- How Long Do I Have to Live in Illinois Before I Can Use Its Bankruptcy Exemptions?
- How Can I Avoid Bankruptcy Exemption Problems in Illinois?
- What Will Happen If I Make an Exemption Mistake in Illinois?
- Should I Hire a Lawyer to Help With Bankruptcy Exemptions in Illinois?
- How Much Does It Cost to File for Bankruptcy in Illinois?
- Can I Make Payments to My Bankruptcy Lawyer?
- Need More Bankruptcy Info?
Illinois bankruptcy exemptions protect your property in bankruptcy, and becoming familiar with bankruptcy exemptions before filing will help you determine whether your assets will be at risk.
If you have more questions, read How to File Bankruptcy in Illinois. You'll find answers, helpful checklists, and an interactive bankruptcy quiz link.
How Do Bankruptcy Exemptions Work?
Bankruptcy helps struggling people get back on their feet by lessening their debt burden, not stripping them of everything they own. Exemptions allow bankruptcy filers to keep things needed to maintain a home and employment.
But paying creditors is also an important consideration. Bankruptcy exemptions balance these interests by letting filers keep necessary property but not unnecessary luxury items. Creditors receive bankruptcy funds when a bankruptcy filer owns "nonexempt" property not covered by a bankruptcy exemption.
How Do I Use Illinois Bankruptcy Exemptions to Protect Property?
You'll compare your property to Illinois's exemption laws. In most states (not all), debtors can use exemption laws to keep property from a creditor's reach in and outside bankruptcy.
Example. Big Creditor sued Ronin and received a $5,000 money judgment. When Big Creditor attempted to "levy" or remove money from Ronin's bank account, Ronin objected in court. Because the state's exemption law allowed Ronin to protect $1,500 of funds in a bank account, Big Creditor could seize only $3,500.
Example. When Maria filed for bankruptcy, she also had $5,000 in her checking account. She listed the state's $1,500 cash exemption in her bankruptcy petition and gave the nonexempt $3,500 to the bankruptcy trustee.
Will Illinois Bankruptcy Exemptions Protect My Property?
Yes, but you must use the Illinois bankruptcy exemptions because the federal bankruptcy exemptions aren't available in this state. However, Illinois filers can use the federal nonbankruptcy exemptions. You'll find both lists below.
In many cases, married filers can double the exemption amount when filing together when they both own the property. Check with a local bankruptcy lawyer for specifics.
What Are Commonly Used Bankruptcy Exemptions in Illinois?
Illinois bankruptcy filers can protect home equity using the Illinois homestead exemption, equity in a car using the Illinois motor vehicle exemption, and more.
Illinois Homestead Exemption
Generally, the homestead exemption protects equity in the home you live in. In Illinois, you can exempt up to $15,000 of equity in your residence, which 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 and only one spouse files for bankruptcy. (735 ILCS 5/12-112.)
Learn more about the Illinois homestead exemption in bankruptcy and other requirements you must meet when protecting your home in bankruptcy.
Illinois Motor Vehicle Exemption
You won't have to be without transportation if you file for bankruptcy, but your car will need to be modest. In Illinois, you can protect up to $2,400 in one motor vehicle. (735 ILCS 5/12-1001(c).) (44-13-100(a)(3).)
Example. Jolene owns a 2008 Toyota Camry worth $12,000. She owes the dealer $10,000, leaving $2,000 of equity. She can file for bankruptcy in Illinois and use the $3,000 motor vehicle exemption to protect her vehicle fully.
Learn more about protecting cars in bankruptcy and how the motor vehicle exemption works in a Chapter 7 case.
Illinois Wildcard Exemption
A wildcard exemption protects any property of your choosing. In Illinois, you can protect $4,000 of any property other than real estate. (735 ILCS 5/12-1001(b).)
Illinois Retirement and Pension Benefits
Most tax-exempt pensions and retirement accounts are exempt because federal law lets filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 USC 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)
You can check with your fund to find out if it qualifies for tax-exempt status. Additionally, Illinois provides that the following pensions and retirement accounts are exempt under Illinois law:
- Pensions for 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. (735 ILCS 5/12-1006.)
More Illinois Bankruptcy Exemptions
- Funds reasonably necessary for support. (735 ILCS 5/12-1001(g)(4).)
- Pre-need cemetery sales and future care funds. (225 ILCS 45/4a; 760 ILCS 100/4; 815 ILCS 390/16.)
- 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).)
- You can exempt your liquor permit. (235 ILCS 5/6-1.)
- All fraternal benefit society benefits are 100% exempt. (215 ILCS 5/299.1a.)
- Life insurance, annuity proceeds, or cash value if the beneficiary is the 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).)
- Partner's interest in specific property. (805 ILCS 205/25.)
- 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 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).)
- $1,500 in all tools of your trade, including professional books. (735 ILCS 5/12-1001.)
- National Guard uniforms and guns. (20 ILCS 1805/10.)
- 100% of all unemployment compensation except for certain child support claims. (735 ILCS 5/12-1001; 820 ILCS 405/1300.)
- 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.)
- All workers' compensation, including claims and awards for occupational diseases. (820 ILCS 305/21.)
- All veterans benefits. (735 5/12-1001(g)(2).)
How Do I Find Illinois Bankruptcy Exemptions?
Illinois's exemption amounts adjust periodically and these figures are not being updated. You'll find Illinois's statutes online on the Illinois General Assembly website. The best way to verify exemptions is by consulting a local bankruptcy lawyer.
What Happens to Property I Can't Exempt in a Illinois Bankruptcy?
One of two things will happen. You'll either lose nonexempt property or pay to keep it, depending on whether you file for Chapter 7 or Chapter 13. Here's how it works.
In Chapter 7, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors. In Chapter 13, filers pay the value of the nonexempt property to unsecured creditors. Learn about secured and unsecured debt in bankruptcy.
The procedural differences are necessary because filers can keep all property in Chapter 13 but not in Chapter 7. Without different systems, creditors would receive less in Chapter 13 than in a Chapter 7 case.
Example. Suppose you couldn't exempt a motorcycle in Chapter 7, and the Chapter 7 trustee sold it and paid unsecured creditors $10,000 after deducting sales costs. If you filed for Chapter 13, you'd pay unsecured creditors at least $10,000 through the Chapter 13 repayment plan to keep the motorcycle.
What Are the Differences Between Chapters 7 and 13 Bankruptcy?
Chapter 7 works for people who can't afford to repay creditors. Chapter 13 filers typically earn too much to qualify for Chapter 7 and must pay into a five-year repayment plan. Before filing for bankruptcy, you'll take a "means test" to determine whether you qualify for Chapter 7 or 13.
Occasionally, people qualifying for Chapter 7 file for Chapter 13 to prevent a home foreclosure, car repossession, or wage garnishment. The Chapter 13 plan allows the filer to catch up on back payments over time, a benefit not available in Chapter 7.
How Long Does it Take to File for Bankruptcy in Illinois?
Most Chapter 7 cases close after four months, although the Chapter 7 bankruptcy trustee sometimes needs additional time to sell property or resolve a dispute. Chapter 13 cases take three to five years to complete.
How Long Do I Have to Live in Illinois Before I Can Use Its Bankruptcy Exemptions?
You can file for bankruptcy in Illinois after living there for over 180 days. However, you must live in Illinois for at least 730 days before using Illinois exemptions. Otherwise, you'd use the previous state's exemptions.
Suppose you hadn't lived in one state the entire two years before filing. In that case, you'd use the exemptions of the state you lived in the longest during the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
More rules exist, including requirements for multiple bankruptcy filings. Find out more about filing for bankruptcy after moving to a new state and who can and can't file for bankruptcy.
How Can I Avoid Bankruptcy Exemption Problems in Illinois?
If you don't exempt your property carefully, you could lose it. Answers to these questions might help you steer clear of typical issues.
Do I automatically get to keep my exempt property? Generally, no. Here's the procedure you'll need to follow: Select the exemption set that best protects your property, list the exempt assets and applicable exemption laws on Schedule C: The Property You Claim as Exempt, and file it with your other required paperwork.
Will someone check my bankruptcy exemptions? The bankruptcy trustee, the court-appointed official tasked with managing your case, will review Schedule C to ensure you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.
Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption will only partially protect it. Believing that the car qualifies as art, Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.
What Will Happen If I Make an Exemption Mistake in Illinois?
Most trustees will likely try to work out the matter informally by discussing it at the 341 meeting of creditors or by phone or email. If you can't resolve the problem, the trustee will file a motion with the bankruptcy court.
It's worth noting that it's not a good idea to finesse exemptions. Not only are you obligated to supply correct information on your bankruptcy forms, but purposefully making inaccurate statements could be fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Should I Hire a Lawyer to Help With Bankruptcy Exemptions in Illinois?
Chapter 13 bankruptcy filers will almost always want to hire a bankruptcy lawyer. Chapter 13 is too complicated for most people to navigate successfully.
Chapter 7 filers also benefit from hiring a bankruptcy lawyer. Still, it's more feasible to represent yourself if you have a relatively simple Chapter 7 case. But you should know that Chapter 7 filers can't dismiss a Chapter 7 matter without court approval, so it's prudent to consult a bankruptcy lawyer about potential issues. The extra step could help prevent unexpected property loss.
How Much Does It Cost to File for Bankruptcy in Illinois?
You can expect to pay $1,500 to $2,500 for the average Chapter 7 case and more for a Chapter 13 matter. Bankruptcy lawyers with more experience will charge higher fees than those practicing in large cities because of the costs associated with doing business.
Even so, most bankruptcy matters won't require a top-tier lawyer. But because of the specialized nature of bankruptcy rules, you will want someone who has filed many cases.
At the time of writing, filing fees are $338 for Chapter 7 and $313 for Chapter 13, and costs for mandatory credit counseling and debt management courses run $50 to $75.
Can I Make Payments to My Bankruptcy Lawyer?
No, not in a Chapter 7 case. Chapter 7 lawyers won't file your matter before you've paid in full because the bankruptcy court would erase any outstanding balance with other dischargeable debts. You can pay Chapter 13 attorneys' fees in installments through the Chapter 13 plan.
Need More Bankruptcy Help?
Did you know Nolo has made the law easy for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining bankruptcy and how it works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated August 29, 2023
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