2026 Illinois Bankruptcy Exemption Changes: Bigger Protections for What Matters Most

Effective January 1, 2026, Illinois is making the most significant update to its bankruptcy and judgment-collection exemptions in many years. These changes to the new Illinois bankruptcy exemptions will help people facing financial challenges protect more of their property. Significantly, this includes homes, vehicles, tools, and even bank funds. Greater protections are here for filing for bankruptcy or defending against creditor actions.

Why These Changes Matter

Illinois is one of the few states that requires bankruptcy filers to use state exemption laws rather than federal exemptions. The Illinois exemptions determine what property a debtor can shield from sale in Chapter 7 and what equity will be exempt in a Chapter 13 plan. The old exemption limits have been in effect in years. Families had little protection — until now.

Key Exemption Increases for 2026

🏠 Homestead (Home Equity) Exemption — Now Much Higher

• Single individual: increases from $15,000 to $50,000
• Joint owners (e.g., married couples): from $30,000 to $100,000
  This change means homeowners can now protect significantly more equity in their primary residence when filing bankruptcy or facing judgment enforcement.
• 735 ILCS 5/12-901 Homestead

🚗 Motor Vehicle Exemption

• Increases from $2,400 to $3,600 (One for each spouse, married couples filing together)
  This helps individuals protect more of their vehicle’s value — crucial for people who rely on cars for work and daily life.
• 735 ILCS 5/12-1001(c) Motor Vehicle (One) (Individual/Joint)

🔧 Tools of the Trade / Implements & Professional Books

• Increases from $1,500 to $2,250 (doubles for Joint filers)
  This helps working individuals keep essential tools, books, and equipment they need to earn a living.

📦 New Household Goods Exemption

Illinois now expressly exempts up to $5,000 in household goods and possessions such as furniture, appliances, clothing, electronics, and similar items. This is a newly recognized category designed to protect everyday essentials. (doubles for joint filers)

735 ILCS 5/12-1001(a) Household Goods description is changing from “Necessary wearing apparel, bibles, schoolbooks, family picture” to “All household goods and personal possessions, including appliances, yard equipment, household equipment and tools, clothing, pets, electronics, medications, and health aids.” – effective January 2026

💰 Automatic Bank Account Protection

For the first time, Illinois law creates an automatic exemption of $1,000 in checking, savings, or credit union accounts for judgment debtors — included within the existing personal property exemptions. This means the first $1,000 in these accounts is shielded without needing a court hearing. This goes towards the $4000 wildcard limit, listed below.

🧰 Wildcard & Other Exemptions

• Wildcard Exemption: stays at $4,000 per person (or $8,000 for a couple). This can be applied to any property not covered by a specific exemption (like cash, bank accounts above the automatic $1,000, etc.).
• Retirement: Certain benefits such as Term life insurance, disability payments, and veterans’ benefits continue to be fully protected as before.
• Jewelry : One Piece $5000 (doubles for joint filers) 735 ILCS 5/12-1001(a) Jewelry (One Piece) (Individual/Joint) – New exemption with a limit of $5,000/$10,000 – effective January 2026
• Personal Injury Award: (Individual/Joint) increases from $15,000/$30,000 to $22,500/$45,000 – effective January 2026.

What This Means for Bankruptcy Filings

These increases to the new Illinois bankruptcy exemptions are only available for bankruptcy cases filed on or after January 1, 2026. If you file before that date, you must use the old, lower limits — which could leave you with much less protected equity in your home and other assets.

Why Timing Matters

For people considering bankruptcy, timing your filing can make a huge difference:

• Filing before Jan. 1, 2026 — you’re new to use the to old exemption amounts.
• Filing on or after Jan. 1, 2026 — you can take full advantage of the new, higher protections from the new Illinois bankruptcy exemptions.

For many debtors, this increased protection means keeping more equity in their homes, safeguarding necessary tools and vehicles, and preserving critical funds in bank accounts.

How We Can Help

If you’re struggling with overwhelming debt, our team can help you understand how the new Illinois bankruptcy exemption laws affect your situation and determine the best timing and bankruptcy chapter for your case. We’ll walk you through every step — from valuation of your assets to maximizing your exemptions — so you can achieve the fresh start you deserve.

📞 Contact us today to schedule a consultation and explore your options. 312-346-7400