Updated: April 12, 2019
If you file for bankruptcy in Illinois, you can protect property with Illinois’ bankruptcy exemptions. Many people can exempt everything they own, but not always. What will happen to nonexempt (noncovered) property will depend on the bankruptcy chapter.
See Bankruptcy Exemptions for more information on how bankruptcy exemptions work.
Certain states offer you a choice between state exemptions and the federal bankruptcy exemption system, but Illinois isn’t one of them. In Illinois, you must use state exemptions. If helpful, you can use the federal nonbankruptcy exemptions, too.
Married couples filing together in a joint bankruptcy get a bonus. Illinois allows a couple to double the exemption amount if both spouses have an ownership interest in the property.
If you don’t exempt your property carefully, you could lose it. You’ll want to steer clear of these common issues.
Do I automatically get to keep exempt property? No. In most cases, you’ll be allowed to exempt property that you’ll need to maintain a job and household, such as furnishings, clothing, and some equity in a vehicle. You must list the assets you can protect official bankruptcy form Schedule C: The Property You Claim as Exempt and file it along with other required paperwork.
Will someone check my exemptions? The bankruptcy trustee—the court-appointed official tasked with managing your case—will review Schedule C to ensure that you have the right to protect the claimed property. A trustee who doesn’t agree with your exemptions will likely attempt to resolve the issue with you informally. If unsuccessful, the trustee will file an objection with the bankruptcy court. The judge will decide whether you can keep the property.
Example. Mason owns a rare, classic car worth $15,000 but the state vehicle exemption won’t adequately protect it. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state’s unlimited artwork exemption. The trustee reviews Schedule C disagrees with Mason’s characterization and files an objection to the exemption with the court. After consideration, the judge will likely side with the trustee and determine that the vehicle doesn’t qualify as a piece of art.
What if I make a mistake? Most trustees won’t file an objection unless it’s clear that the debtor is trying to pull something over on the court. At least not without trying to resolve the issue first. If there’s a minor exemption problem, the trustee will likely call you to work the issue out informally.
It’s worth noting that it’s not a good idea to finesse exemptions. Not only do you have an obligation to supply correct information on your bankruptcy forms, purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Unless otherwise noted, all law references are to the Illinois Compiled Statutes (ILCS) which you’ll find on the Illinois General Assembly website.
You protect equity in your residence with the homestead exemption. In Illinois, you can exempt up to $15,000 in equity in your home, which includes a farm, mobile home, lot with buildings, condominium, or cooperative. This exemption also includes 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.)
For more details about how the homestead exemption works in Illinois, see The Illinois Homestead 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).)
If an exemption doesn't adequately cover 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).)
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 on account of 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).)
Crime Victim’s Compensation
You may exempt 100% of any award given as compensation for a crime. (735 ILCS 5/12-1001(h)(1),(i); 740 ILCS 45/18.)
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.)
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).)
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.
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 a 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.)
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).)
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.)
You can exempt 100% of all unemployment compensation except for certain child support claims. (735 ILCS 5/12-1001; 820 ILCS 405/1300.)
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.)
All workers compensation is 100% exempt, including claims and awards for occupational diseases. (820 ILCS 305/21.)
All veteran’s benefits are 100% exempt. (735 5/12-1001(g)(2).)
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.