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Illinois Bankruptcy Exemptions

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In a Nutshell

The intent of bankruptcy is not to strip you of everything you own. Exemptions allow you to keep many, if not all, of your belongings.

Written by Attorney Eva Bacevice.  
Updated August 7, 2020

Bankruptcy exemptions can play a large role in deciding whether or not you want to file a case. Many people believe that when you file a case you will have to give up all of your possessions. This, however, is generally not the case, because exemptions function as built in protection. Debtors are usually able to avoid turning over most, if not all of their property by the proper use of exemptions.

When you file a bankruptcy case, your property becomes part of the “bankruptcy estate.” The trustee assigned to your case has access to your bankruptcy estate, and can liquidate or sell the assets that are within the bankruptcy estate. This is offset, however, by exemption laws, which are laws that allow you to protect all of some of your property. When you file an individual bankruptcy case, whether it is a Chapter 7 or a Chapter 13, it is important to understand what exemption laws apply. Below we will explore in greater depth the exemptions available in Illinois.

In many states you have the opportunity to choose whether you would like to follow the Federal Exemptions or State Exemptions. Illinois is not a state where you have a choice because Illinois has “opted out” of federal bankruptcy exemptions via legislation. Illinois does, however, allow the use of certain federal exemptions in addition to your Illinois exemptions.

Exemptions allow you to protect both real and personal property, up to a certain value. We will highlight some of the most commonly-used exemptions in this article, and you can access the full set in the Illinois Statutes.

Real Property

For real property there is a homestead exemption which protects the equity in your residence. Equity is the value which exists after you take the Fair Market Value (FMV) of your home less 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, $30,000 if married and filing jointly. Illinois also offers the option to protect more equity in your home if it is owned by tenancy by the entireties (a particular form of joint ownership for married couples). If either real estate or personal property are sold than the proceeds of those sales are exempt for one year.

Personal Property

In terms of personal property Illinois fully exempts the following personal items: clothing, books, health aids, family pictures, prepaid tuition trust funds, and certificates of title to any watercraft over 12 feet in length. Workers compensation benefits and Veterans benefits are also fully exempt, as well as life insurance proceeds to a spouse or child required for support, life insurance annuity proceeds/cash value, health/disability benefits and fraternal society benefits.

Certain Pensions and IRAs are exempt. Exempt property is protected from becoming part of the bankruptcy estate. meaning they never come into the bankruptcy estate.

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 will allow you to protect and keep your property either fully, or partially.


Bankruptcy is designed as a remedy to aid a person or couple in financial difficulty and get them back on their feet. It is intended to offer a fresh start, so it make sense that there are exemption laws that allow you to protect your possessions up to varying amounts. It would be very difficult to start over from nothing. The intent of the remedy is not to strip you of everything you own.. Exemptions allow you to keep many, if not all, of the important items you will 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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