What Are the Illinois Bankruptcy Exemptions?

Why Are Illinois’ Bankruptcy Exemptions Important? 

Bankruptcy exemptions are important because they help filers keep their property during a Chapter 7 case. Chapter 7 is also called “liquidation” bankruptcy because if you own expensive property that’s not covered by an exemption, the bankruptcy trustee overseeing your case can sell it and give the profits to your creditors. Though legally possible, this is extremely uncommon in Chapter 7 cases. Most Chapter 7 filers get to keep everything they own, thanks to exemptions.

Married couples in Illinois filing bankruptcy together can double the exemption amounts so long as they own the property together.

If you’re feeling intimidated by learning about exemptions and just want help filing your bankruptcy case, take our quick screener to see if you’re eligible to use Upsolve’s free filing tool. Upsolve has helped over 13,000 people file bankruptcy and get rid of over $700 million of debt. Our services are 100% free.

Can Illinois Residents Use the Federal Bankruptcy Exemptions?

No. 

While there are federal bankruptcy exemptions, not all states allow residents to use them. Illinois is one such state. If you’ve lived in Illinois for at least the last two years, you’re required to use the state exemptions when you file Chapter 7 bankruptcy. Fortunately, Illinois has generous bankruptcy exemptions.

As an Illinois resident, you’ll also have access to the federal non-bankruptcy exemptions, which help you protect certain money benefits like retirement accounts.

What Are the Illinois Bankruptcy Exemptions?

Bankruptcy exemptions allow you to keep property that you need to maintain a household and job. These items, usually called personal property, include clothing, furnishings, and some equity in a car. Exemptions also help protect real property — such as a home or land — and money benefits like wages and retirement benefits.

Real Property: The Illinois Homestead Exemption

The homestead exemption helps you protect equity you have in a home or land that you own. In Illinois, the homestead exemption amount is $15,000. If you’re married, filing bankruptcy jointly, and own the home with your spouse, you can double this to $30,000.

To calculate how much equity you have in your house, take the current market value of the home minus what you owe. The resulting amount is your equity. If it’s $15,000 or less, your home is protected.

Source: Section 735 ILCS 5/12-901

Personal Property Exemptions

Illinois’ personal property exemption allows you to protect several different types of property, from household goods to your car and more. 

In Illinois, the following personal property is fully exempt:

• Necessary wearing apparel (clothing)

• Bible and school books

• Family pictures

• Professionally prescribed health aids

• A certificate of title to any watercraft over 12 feet in length

• Pre-need cemetery sales, as well as future care funds. 

• Liquor permit

There is also a $1,500 tools of the trade exemption, which you can use to protect anything you use for your profession.

Source: Section 735 ILCS 5/12-1001(a)(g)(d)

Motor Vehicle

Illinois’ motor vehicle exemption is pretty modest. It allows you to protect $2,400 of equity in your car. Again, equity is calculated by taking the fair market value of the car minus what you owe on it. If you own the car outright, your equity is equal to the car’s fair market value.

You can boost this exemption by also using the wildcard exemption to help protect the equity in your car.

Source: Section 735 ILCS 5/12-1001(c)

Wildcard Exemption

Illinois has a $4,000 wildcard exemption.

Wildcard exemptions are important because they can help you property any property that’s not already covered by an exemption. Or you can add the wildcard amount to an existing exemption amount to increase it.

There are a few exceptions though. According to Illinois law, you can’t use the wildcard exemption to protect real estate or wages.

Source: Section 735 ILCS 5/12-1001(b)

Money Benefits

Money benefits broadly cover pensions, retirement accounts, wages, and other public assistance or benefits.

Pension Exemption

Note that pensions for various kinds of employees are exempt. They include police, firefighters, municipal employees, General Assembly members, employees of a city or county or state, 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 Illinois law.

Source: Section 735 ILCS 40-5/2-154, 40-5/3-144.1, 40-5/5-218, 40-5/4-135, 40-5/6-213, 40-5/7-217, 40-5/8-244, 40-5/9-228, 40-5/11-223, 40-5/12-190, 40-5/13-805, 40-5/14-147, 50-5/15-185, 50-5/16-190, 40-5/17-15, 40-5/18-161, 40-5/19-117, 40-5/19-218, 40-5/22-230, and 735-5/12-1006

Wage Exemption

You may protect the higher of the following amount of your wages: 85% of your gross earnings or 45 times the federal hourly minimum wage.

Public Benefit Exemptions

The following public benefits are fully exempt:

• Any aid to aged, blind, and disabled

• Public assistance, including earned income tax credits and child tax credits (However, this applies to future payments and not funds that you have already received.)

• Social Security benefits

• Veterans' benefits

• Unemployment compensation

• Workers' compensation

• Workers' occupational disease compensation

• Crime victims' compensation

• Restitution payments for World War II relocation of Aleuts and Japanese Americans

Source: Section 735 ILCS 305-5/11-3 and 735-5/12-1001(g)(1), 735-5/12-1001, 820-305-21, 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)

Source: Section 735 ILCS 215-5/238, 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 their dependents. 

Source: Section 735 ILCS 5/12-1001(g)(4)

Need Help Filing Chapter 7 Bankruptcy in Illinois? 

If you’re feeling intimidated by the bankruptcy process and you want some help but can’t afford to hire an attorney, take our quick screener to see if you’re eligible to use Upsolve’s free filing tool. Over 13,000 people have used the tool and successfully wiped out over $700 million in debt through Chapter 7 bankruptcy.

If you have concerns about property you own and whether it’ll be protected, consider scheduling a free consultation with a bankruptcy attorney to get some personalized advice.