What are the Illinois Bankruptcy Exemptions?

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Written by the Upsolve Team.  Reviewed by Andrea Wimmer, Esq
Updated February 25, 2020

What are the Illinois bankruptcy exemptions, and why are they important in a Chapter 7 bankruptcy? 

For many people struggling with debt in Illinois, one of the main concerns about bankruptcy is often all about losing their valuable assets, such as personal property, which they have worked so hard to acquire. Millions of individuals are saddled with very high unsecured debts, such as credit cards, through no fault of their own. Some people in the state have steep medical bills as well. Others may be forced to rely on credit cards, especially during a period of unemployment. While these individuals should at least consider Chapter 7 bankruptcy, they are often afraid that they will lose their important assets, such as a car. 

There is a common assumption, and perhaps it’s one of the oldest and most damaging ones, that filing for Chapter 7 bankruptcy will always mean you will have to give up all or most of your personal belongings and valuable assets, like  your home, retirement accounts, and even your vehicles. However, this is far from the truth. Wondering why? The state of Illinois provides you with bankruptcy exemptions and they can help you protect your most needed possessions. A bankruptcy exemption simply means that you can file bankruptcy and keep most (or all) of your assets. 

Actually, many people who file for Chapter 7 bankruptcy in the state are able to hang on to most, if not all, of their possessions, mainly thanks to the power of federal and state exemptions. 

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Does Illinois allow the use of federal bankruptcy exemptions?

If you have done a bit of research on bankruptcy cases in Illinois or exempt property, you will probably have come across the terms federal bankruptcy exemptions and state exemptions. Many states in the US allow people to choose between the federal exemptions and state exemptions. However, you don’t have that option in Illinois. In Illinois, you are not permitted to use the federal bankruptcy exemptions if you’ve lived in the state for at least 2 years when you file bankruptcy. Fortunately, Illinois has generous bankruptcy exemptions that can protect your property. 

And you can use the federal nonbankruptcy exemptions as well if you have any assets covered by them. Married couples filing bankruptcy together in the state get a bonus. Illinois allows married couples to double their exemption amount as long as both spouses have an ownership interest in the asset

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Illinois Bankruptcy Exemptions

In most cases, bankruptcy exemptions in the state allow you to keep exempt property that you will need to maintain a household and job. The property includes items like clothing, furnishings, and some equity in a car. In almost every case, bankruptcy doesn’t leave an individual penniless and without any personal belongings. Chapter 7 bankruptcy is often the best choice when filers don’t have major assets they need to protect from creditors.

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Real Property - The Illinois Homestead Exemption

From sprawling rural estates to high rises in Illinois, plenty of Chicago homes and properties qualify as homesteads – and can provide their owners with considerable protection from pesky creditors, as a result. And this is all thanks to the amazing Illinois homestead exemption. The homestead exemption in Illinois is one on a list of important bankruptcy exemptions that protect your property. 

This exemption allows you to protect a specific amount of equity in your house from the trustee in your Chapter 7 bankruptcy case. And this means your home can’t be used to repay your creditors as part of your bankruptcy case. Note that the homestead exemption in the state is available in Chapter 7, as well as Chapter 13 bankruptcy cases.

At this time, the homestead exemption in Illinois allows owners to protect up to $15,000 of equity in their homes. Also, a child or spouse of a deceased owner may claim a homestead. You can also exempt sale proceeds if you meet certain conditions. Married couples in the state filing bankruptcy jointly can protect up to $30,000. The exact value may change over time.

To use the Illinois homestead exemption, your name has to be on the property deed. And married couples must have both their names if they want to claim the full amount.

Wild Card Exemption

Here is another important exemption. Illinois has a generous wildcard exemption that will help you protect your property. You can apply this $4,000 exemption to any property that is otherwise non-exempt. The list includes items, such as:

  • Cash in your savings account

  • Equity in your vacation cabin, and

  • An otherwise non-exempt car or motor vehicle

The great thing is that the wildcard exemption in the state is also simple to use. But, while the exemption applies to any property irrespective of its character or ownership, filers can’t use the Illinois wildcard exemption to protect real estate and wages.

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Personal Property Exemptions

Broadly speaking, you might be able to protect a wide array of personal property, depending on your circumstances. This category of bankruptcy exemption in Illinois covers your car and non-retirement bank accounts. It also covers most of your other personal possessions, such as jewelry, other than your house. Some of the Illinois bankruptcy exemptions filers may use to protect their property in a Chapter 7 bankruptcy or Chapter 13 case include the following.

Motor Vehicle

If you are having some financial troubles and have filed for bankruptcy in Illinois, it is likely that you will need access to your car. The good news is that there is a bankruptcy exemption in the state that allows you to protect your motor vehicle. The $2,400 motor vehicle exemption amount may seem very small. However, just like the Illinois homestead exemption, the figure represents the equity in your vehicle. The amount of the exemption is $4,800 for married couples. Note that as a rule of thumb, brand new vehicles have almost no equity while used vehicles have almost no value. So, you are probably protected either way.

Other Personal Property 

You can also protect the following personal property. Any books, clothing, prescribed health aids, as well as family pictures, are exempt under the law. If you have any tools of the trade, they are also exempt up to $1,500. Additionally, you can protect a certificate to a watercraft more than 12 feet in length. Some college savings funds, including the Illinois College Savings Pool, are also exempt. Personal injury recoveries are exempt up to $7,500. Wrongful death recoveries that you or your dependents need for support are also exempt under the law. A wildcard exemption in the state also allows filers to claim $4,000 in additional property exemptions, excluding wages.

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Money Benefits

Pension Exemption

Note that pensions for various kinds of employees are exempt. They include police, firefighters, municipal employees, General Assembly members, city, county, and state employees, retirement board employees, sanitary district employees, park employees, state university employees, judges, teachers, correctional employees, and public library employees. You can benefit from this exemption if you have pensions or retirement funds, such as IRAs, ERISA qualified pensions and retirement plans, 403(b)s, 401(k)s, and public employee retirement benefits. The rule of thumb is that any pension that is covered under federal tax exemptions is considered fully exempt under the law. If you have significant pensions or retirement benefits, talk with a competent bankruptcy attorney in Illinois on what you can do to protect these assets from your bankruptcy trustee

Here are some specifics:

  • Section 40-5/2-154 covers General assembly members.

  • Sections 40-5/3-144.1 and 40-5/5-218 cover police officers.

  • Sections 40-5/4-135 and 40-5/6-213 cover firefighters.

  • Section 40-5/7-217 and 40-5/8-244 cover municipal employees.

  • Section 40-5/9-228 covers county employees.

  • Section 40-5/11-223 covers civil service employees.

  • Section 40-5/12-190 covers park employees.

  • Section 40-5/13-805 covers sanitation district employees.

  • Section 40-5/14-147 covers state employees.

  • Section 50-5/15-185 covers state university employees.

  • Section 50-5/16-190 and 40-5/17-151 cover teachers.

  • Section 40-5/18-161 covers judges

  • Section 40-5/19-117 covers the house of correction employees.

  • Section 40-5/19-218 covers public library employees.

  • Section 40-5/22-230 covers disabled firefighters and children and widows of firefighters.

  • Section 735-5/12-1006 covers public employees.

Wage Exemption

You may protect the higher of the following amount of your wages:

  • 85 percent of your gross earnings

  • Or forty five times the federal hourly wage a week (minimum).

Public Benefit Exemptions

Under Sections 305-5/11-3 and 735-5/12-1001(g)(1) any aid to aged, blind, and disabled is exempt. Also, note that public assistance, such as earned income tax credit, as well as child tax credits, are exempt under the law. However, this applies to future payments and not funds that you have already received. Under Section 735-5/12-1001, Social Security benefits, Veterans' benefits, unemployment compensation and crime victims' compensation are exempt. Also, restitution payments for World War 2 relocation of Aleuts and Japanese Americans are exempt. Under Section 820-305-21 workers' compensation exempt. And Workers' occupational disease compensation is exempt under Section 820-310/21.

Insurance

You may also be able to protect certain insurance benefits, such as: 

  • Your health and disability benefits

  • Fraternal benefit society benefits 

  • Life insurance proceeds to a child, spouse, or dependent

  • Homeowners’ proceeds arising from the destruction of a home (you can protect up to $15,000)

Using Section 215-5/238, you can protect your life insurance benefit, annuity, or cash value, provided the beneficiary is a child, spouse, parent, or a dependent of the beneficiary. Fraternal benefit society benefits are exempt under Section 215-5/299.1a.

Alimony and Child Support 

Since certain family law orders are deemed important in the country and in Illinois as a matter of public policy, child support and alimony are considered exempt in Illinois to the extent that these payments are reasonably necessary for the ongoing support of the bankruptcy filer and any of her or his dependents. You can exempt the amount under Section 735 ILCS 5/12-1001(g)(4)

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Other Illinois Exemptions

Claims for Tortious or Negligence Conduct

You are allowed to exempt a payment that is made to you because of the wrongful death of any individual of whom you’re a dependent. The amount is exempt to the degree reasonably necessary for your support. Also, you may protect a personal injury award of up to $15,000 under the Illinois bankruptcy exemptions.

Partnership Property

The state has also enacted the Uniform Partnership Act, and this act exempts a partner’s interest in any specific property.

Cemeteries and Burial Funds

Note that you can also protect all pre-need cemetery sales as well as future care funds. 

Franchise, License Interests, and Permits

You may exempt your liquor permit.

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Filing Chapter 7 bankruptcy? 

Bankruptcy can protect most, if not all, of your assets. You should contact an experienced bankruptcy lawyer in Illinois to see how they can help you. Whether you are a wage earner, a business owner, retired, or otherwise, they can address your specific financial situation with a strategic plan to help put extreme indebtedness behind you. This will help you enjoy life again and get a fresh start. 

We have discussed some of the most common bankruptcy exemptions in Illinois. There may be other exemptions that might apply to your situation. You will have to ensure that you declare all of the bankruptcy exemptions you are eligible for in the state. You can always talk to an Illinois bankruptcy attorney. The attorney will be able to tell you if you have any nonexempt property that might be at risk in a Chapter 7 case and recommend a Chapter 13 filing instead. If you are not able to afford a bankruptcy attorney to help you, you can take this simple and short quiz in order to find out if Upsolve can help you. 

By knowing the Illinois bankruptcy exemption laws, you’ll be in a better position to know and understand how bankruptcy can offer you the debt relief you need under federal law and, at the same time, keep your property under Illinois state law. 

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About the authors

The Upsolve Team
Upsolve is lucky to have an incredible team of contributing writers all over the country to help us keep our content up to date, informative, and helpful for everyone who visits upsolve.org!

Andrea Wimmer, Esq

Andrea practiced exclusively as debtors’ counsel in consumer chapter 7 and 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team full time in August 2019. While in private practice, Andrea handled all ban... read more

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