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In the state of Illinois, bankruptcy exemptions are used to protect certain assets from being seized by the bankruptcy court and used to repay creditors. The purpose of these exemptions is to ensure that filers are able to maintain a basic standard of living and keep essential property after filing for bankruptcy.

There are two main types of bankruptcy exemptions in Illinois: state exemptions and federal exemptions. State exemptions are those specified by Illinois law, while federal exemptions are those specified by the U.S. Bankruptcy Code. Filers in Illinois must use the Illinois state exemptions under most circumstances.

State Exemptions in Illinois:

• Homestead Exemption: This exemption allows filers to protect the equity in their primary residence up to a certain dollar amount. In Illinois, the homestead exemption is $15,000 for individuals and $30,000 for married couples.
• Personal Property Exemption: This exemption protects personal property, such as jewelry, and household furnishings, up to a certain dollar amount. In Illinois, the personal property exemption is part of the wildcard exemption (see below) with a total exemption amount of $4,000 for individuals, or $8,000 for married joint filers.
• Tools of the Trade Exemption: This exemption protects tools, equipment, and other items that are necessary for the filer’s trade or business, up to a certain dollar amount. In Illinois, the tools of the trade exemption is $2,400.
• Retirement Account Exemption: This exemption protects retirement accounts, such as IRAs and 401(k)s, from being seized by the bankruptcy court. In Illinois, there is no specific dollar amount limit for this exemption, but there are limits on the type of account and the amount that can be protected.
• Wildcard Exemption: This exemption allows filers to protect cash and personal property (see above) for other assets of their choosing, up to a certain dollar amount. In Illinois, the wildcard exemption is $4,000 for individuals, $8,000 for joint filers.
• Clothing- Necessary wearing apparel is 100% exempt.

Federal Exemptions in Illinois:

• The federal exemptions include exemptions for items such as Social Security benefits, veterans’ benefits, and public assistance, as well as exemptions for pensions and IRAs.

It is important to note that exemptions in Illinois and the federal exemptions are subject to change, and that the specific exemptions available to a filer can depend on a variety of factors, such as the filer’s income and assets, the type of bankruptcy being filed, and the filer’s individual circumstances.

In conclusion, bankruptcy exemptions in Illinois are an important tool for filers seeking to protect their assets while they navigate the bankruptcy process. Understanding the available exemptions, and how they can be used to protect assets, is an important part of the bankruptcy process. If you are considering filing for bankruptcy, it is recommended that you speak with an experienced bankruptcy attorney who can help you understand the exemptions available to you and how they can be used to protect your assets.

Leeders Law is happy to offer you a free consultation to discuss how they can use the bankruptcy exemptions to your advantage.

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There are also proposed changes to the homestead exemption, allowing debtors to protect up to $250,000 in equity in their homes, allowing more people to qualify for chapter 7 bankruptcy.

Finally, they are seeking to allow for discharge of student loans in bankruptcy as well, which is currently very difficult to do under the current bankruptcy caselaw. While it is possible, student loan discharge is rarely granted.

I feel these first two provisions make sense, and have a good intent. Congress has been talking about changing the student loan dischargeability laws, but should propose this as separate legislation to be discussed, and studied for its impact. But legislation always has extra provisions weaved into the proposals, so this is nothing new. I would support some modifications of the student loan dischargeability laws, but I am not in favor of a straight elimination of student debt.

The legislation can be reviewed here: The Medical Bankruptcy Fairness Act of 2021

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Illinois has opted out of the federal exemptions, providing a list of asset protections granted by state law.

The Illinois homestead exemption law provides the bankrupt debtor protection of up to $15,000 of the equity in their residence in Illinois.

Specifically:
§ 735 ILCS 5/12-901. Amount
Sec. 12-901. Amount. Every individual is entitled to an estate of homestead to the extent in value of $ 15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence. That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy, or judgment sale for the payment of his or her debts or other purposes and from the laws of conveyance, descent, and legacy, except as provided in this Code or in Section 20-6 of the Probate Act of 1975 [755 ILCS 5/20-6]. This Section is not applicable between joint tenants or tenants in common but it is applicable as to any creditors of those persons. If 2 or more individuals own property that is exempt as a homestead, the value of the exemption of each individual may not exceed his or her proportionate share of $ 30,000 based upon percentage of ownership.

There ya go, if you live in your property, you get $15000 exemption for your home in Illinois, $30000 to protect the equity if you own it jointly with your spouse and you are both filing bankruptcy.

In Chicago, as well as other areas, values of homes have plummeted, and there is hardly any equity in most of my bankruptcy case filings to even worry about the exemption not covering enough.

The exemption protects any equity beyond the balance on the mortgage and also, we factor in brokers fees and commissions to sell the home too.

Give us a call to discuss equity in your Illinois home, and we’ll examine the exemption and any equity for you, free of charge! You can’t beat that!!

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