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Illinois Bankruptcy Exemptions

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In a Nutshell

When you file bankruptcy, you won't lose everything you own. Exemptions allow you to keep many, if not all, of your belongings.

Written by Attorney Eva Bacevice
Updated January 25, 2022

Exemptions can play a big role in deciding whether or not you want to file a bankruptcy case. Many people believe that filing bankruptcy means you have to give up all of your possessions. But that's not usually the case. Exemptions protect filers during the bankruptcy process. Debtors are usually able to avoid turning over most or all of their property by using exemptions properly.

Your property becomes part of the bankruptcy estate once you file a Chapter 7 or a Chapter 13 bankruptcy case. The trustee assigned to your case has access to your bankruptcy estate and can liquidate or sell the assets in it. Some of those assets are off-limits, though, due to exemption laws. Exemptions allow you to protect both real and personal property up to a certain value. These laws allow you to protect much of your property.

When you file an individual bankruptcy case, it's important to understand what exemption laws apply. In some states, you can choose whether you want to use the federal or state exemptions. This isn't the case in Illinois because it's opted out of federal bankruptcy exemptions via legislation. But Illinois does allow filers to use certain federal exemptions in addition to the state exemptions.

Let's look at some of the most common Chapter 7 exemptions in Illinois.

Real Property

Illinois has a homestead exemption that protects the equity in your primary residence. Equity is the value you have in your home after you take the fair market value (FMV) of your home, then subtract any mortgage(s) or other liens (such as property taxes or a water bill).

In Illinois, the homestead exemption is $15,000 of equity in your residence for an individual or $30,000 if you're married and you file your taxes jointly. Illinois also offers the option to protect more equity in your home if it is owned by tenancy by the entireties. This is a form of joint ownership for married couples. If you sell your real estate or personal property, the proceeds of that sale are exempt for one year.

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Personal Property

Illinois fully exempts the following types of personal property:

  • Clothing

  • Books

  • Health aids

  • Family pictures

  • Prepaid tuition trust funds

  • Certificates of title to any watercraft over 12 feet long

Certain types of benefits are also included under this personal property exemption, such as:

  • Workers' compensation benefits

  • Veterans benefits

  • Life insurance proceeds to a spouse or child required for support

  • Life insurance annuity proceeds/cash value

  • Health/disability benefits

  • Fraternal society benefits.

Certain pensions and IRAs are also exempt. Exempt property doesn't become part of the bankruptcy estate. This means it's not at risk during the bankruptcy.

In addition to laws that fully exempt certain personal property, there are exemption laws that allow you to exempt up to a certain value for other property you own. Applying exemptions to property that you own allows you to protect and keep your property either fully or partially.

Let's Summarize...

Bankruptcy is a form of debt relief designed to help people get back on their feet after experiencing financial difficulty. It gives you a fresh start. Exemption laws help ensure that this fresh start doesn't mean you have to start over from nothing. These laws protect many, if not all, of the important items you'll need in your next chapter.

Written By:

Attorney Eva Bacevice


Eva G. Bacevice graduated from the University of Michigan Law School in 2001. She practiced law for close to a decade in the area of consumer bankruptcy. She now works in higher education as an Academic Advisor for undergraduate students at the Stephen M. Ross School of Business,... read more about Attorney Eva Bacevice

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