Illinois Bankruptcy Exemptions

You'll protect property in an Illinois bankruptcy using Illinois bankruptcy exemptions.

By , Attorney

Illinois's bankruptcy exemption laws protect property in bankruptcy and are essential to a fresh start. Not only will you reduce debt and straighten your finances, but Illinois bankruptcy exemptions will let you keep what you need to work and live. But exemptions protect essential assets only, not unnecessary luxury goods, and learning about the following can help prevent a costly property loss:

  • the exemptions available under Illinois and federal exemption systems
  • what happens to property you can't protect with an exemption, and
  • if you've lived in Illinois long enough to use Illinois's bankruptcy exemptions.

The information below will help. Also, try our ten-question bankruptcy quiz. It flags areas you'll want to be reviewed by a local bankruptcy lawyer.

Using Exemptions in an Illinois Bankruptcy

Bankruptcy is a federal process, so it works the same way in every state. However, you'll use Illinois state laws known as "bankruptcy exemptions" and federal nonbankruptcy exemptions to protect your property. Federal bankruptcy exemptions aren't available in Illinois.

Illinois Bankruptcy Exemptions

The state exemptions below aren't being updated and could have changed since the 2021 update. Meet with a bankruptcy attorney for current information. Federal exemption amounts are current through March 31, 2025.

Homestead Exemption

  • $15,000 for single filers.
  • $30,000 for joint-filing spouses who co-own property.
  • Available to a spouse or child of a deceased owner.
  • Sale proceeds exempt for one year.

735 ILCS §§ 5/12-901, 902, 906

Learn about using the homestead exemption in Illinois.

Motor Vehicle Exemption

  • $2,400

735 ILCS § 5/12-1001(c)

Learn about the motor vehicle exemption in Illinois.

Tools of Trade Exemption

  • $1,500
  • National Guard uniforms, arms, equipment

735 ILCS §§ 5/12-1001(d); 20-1805/10

Wildcard Exemption

  • $4,000 of any personal property (no real estate)

735 ILCS § 5/12-1001(b)

Learn about the wildcard exemption in Illinois.

Personal Property Exemptions

  • necessary clothing
  • bible, school books, family pictures
  • health aids
  • personal injury recoveries up to $15,000
  • wrongful death recoveries needed for support
  • proceeds from sale of exempt property;
  • Illinois College Savings Pool or ABLE accounts (exceptions apply)
  • preneed cemetery sales and future care funds
  • title certificate for boat more than 12 feet
  • property held in trust

735 ILCS §§ 5/12-1001(a), (e), (h)(2), (h)(4), (j); 225 ILCS §§ 45/4a(b); 760 ILCS §§ 100/4(6); 815 ILCS §§ 390/16(e); 625 ILCS §§ 45/3A-7(d); 735 ILCS §§ 5/2-1403

Retirement Accounts

  • general assembly members (40 ILCS § 5/2-154)
  • police officers, firefighters (40 ILCS § 5/3-144.1; 40 ILCS § 5/5-218; 40 ILCS § 5/4-135; 40 ILCS § 5/6-213; 40 ILCS § 5/22-230)
  • city, county, state employees (40 ILCS §§ 5/8-244; 40 ILCS §§ 5/9-228; 40 ILCS §§ 5/14-147)
  • laborer and retirement board employees (40 ILCS § 5/11-223)
  • park employees (40 ILCS § 5/12-190)
  • sanitation district employees (40 ILCS §§ 5/13-213, 805)
  • state university employees (40 ILCS § 5/15-185; 40 ILCS § 5/2-154)
  • teachers (50 ILCS § 5/16-190; 40 ILCS § 5/17-151)
  • judges (40 ILCS § 5/18-161)
  • house of correction employees (40 ILCS § 5/19-117)
  • retirement and pension benefits (735 ILCS § 5/12-704)
  • IRAs and ERISA-qualified benefits (735 ILCS § 5/12-1006)

Federal law lets all filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 U.S.C. 522(b)(3)(C); (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)

Available Federal Exemptions

Federal Nonbankruptcy Exemptions

Where to Find Statutes

Illinois Compiled Statutes

Other Illinois Bankruptcy Exemptions

Below you'll find more Illinois exemptions, but it's not an exhaustive list, and it's not being updated. As with all exemptions, check for current amounts and qualification requirements.

Illinois Public Benefits and Wage Exemptions

  • Public assistance and earned income tax credit (305 ILCS § 5/11-3; 735 ILCS § 5/12-1001(g)(1)
  • Wages – 85% of earned but unpaid weekly wages or 45 times the federal minimum hourly wage (or state hourly wage, if higher) (735 ILCS § 5/12-803; 740 ILCS § 170/4)
  • Social Security benefits (735 ILCS § 5/12-1001(g)(1))
  • Veterans' benefits (735 ILCS § 5/12-1001(g)(2))
  • Unemployment compensation (735 ILCS § 5/12-1001(g)(1),(3); 820 ILCS § 405/1300)
  • Alimony and child support needed for support (735 ILCS § 5/12-1001(g)(4))
  • Crime victims' compensation (735 ILCS § 5/12-1001(h)(1),(i); 740 ILCS § 45/18)
  • Restitution payments for World War II relocation of Japanese Americans and Aleuts (735 ILCS § 5/12-1001(h)(5))
  • Workers' compensation (820 ILCS § 305/21)
  • Workers' occupational disease compensation (820 ILCS § 310/21)

Illinois Insurance Exemptions

  • Life insurance, annuity, or cash value if the beneficiary is spouse, child, parent, or another dependent of the beneficiary (215 ILCS § 5/238; 735 ILCS § 5/12-1001(f))
  • Fraternal benefit society benefits (215 ILCS § 5/299.1a)
  • Health and disability benefits (735 ILCS § 5/12-1001(g)(3))
  • Life insurance proceeds needed for support (735 ILCS § 5/12-1001(h)(3))

What Happens to Property You Can't Exempt in an Illinois Bankruptcy?

It will depend on the chapter you file. In Chapter 7 bankruptcy, you lose property not covered by an exemption. The bankruptcy trustee responsible for managing your case will sell the property for the benefit of your creditors. In Chapter 13 bankruptcy, you can keep all of your property; however, that luxury comes at a price—literally. You'll pay your creditors the value of any property not covered by an exemption in your Chapter 13 repayment plan.

For example, say you own a car outright worth $3,000, and your state has a vehicle exemption of up to $5,000. Here's what would happen in each chapter.

  • Chapter 7 Bankruptcy. If you file for Chapter 7 bankruptcy, you will get to keep your car because the exemption would protect the equity fully. In the same example, if your vehicle were worth $15,000, the bankruptcy trustee would sell your vehicle, pay you $5,000 for the exemption, and distribute the rest to your unsecured creditors.
  • Chapter 13 Bankruptcy. In Chapter 13, you wouldn't need to pay extra to your creditors through your repayment plan. However, if the car were worth $15,000, you'd need to pay your creditors at least $10,000 (minus sales costs) through your plan.

Keep in mind that these examples don't take into account a vehicle loan. You'll find more information below.

How Do You Protect a Financed Home or Car in an Illinois Bankruptcy?

Many wonder if they can wipe out a home mortgage or car loan and keep the property without paying more. The simple answer is "No." Protecting the equity with an exemption will keep the Chapter 7 trustee from selling it, and you won't have to pay extra to keep it in Chapter 13, but there are more steps to take.

In a Chapter 7 case, the mortgage or car payment must be current, and you'll need to be able to continue to make the payment. Why? Because when you purchased it, you gave the lender a property "lien." The lien created a secured debt allowing the lender to take back the property if you don't pay as agreed, even in bankruptcy. So if you're behind on the payment and file for Chapter 7, you'd lose the property. Instead, consider catching up on arrearages in Chapter 13.

Learn more about how mortgages work in bankruptcy and how to file for bankruptcy without losing a car.

What Are the Illinois Bankruptcy Exemption Timing Rules?

It's tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it doesn't work that way. To prevent people from abusing the system, filers must live in the state for at least two years—otherwise, they must use the previous state's exemptions. Here's how it works.

  • If you've made your permanent home (your "domicile") in your current state for at least two years, you can use the state's exemptions (or the federal exemptions if allowed).
  • If your domicile hasn't been in the same state for two years, the rules get more complicated, so prepare yourself. It sounds so strange we'll explain it in three different ways so that you know you didn't read it wrong. Here goes: You'll choose the state you lived in the longest during the 180 days immediately before the two years before filing.

Did you get that? If not, here's a way to figure it out. Count back two-and-a-half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.

Still confused? Let's try an example. Suppose you planned to file on January 1, 2022. Your two-and-a-half-year period would start July 1, 2019, and you'd qualify to use the exemptions of whichever state you resided in the most from July 1, 2019, through December 31, 2019. You wouldn't have to file your case there, but you'd use that state's exemptions. Hopefully, that helps!

Learn more about timing your bankruptcy filing, including when to delay or avoid bankruptcy.

Special Homestead Exemption Rules

The homestead exemption protects your ownership interest in your home. You'll need to read your state's homestead statute to determine the specifics, such as the amount of equity and acreage covered, whether the exemption protects a manufactured home, and if you need to file a homestead exemption with the county clerk. But in all states, the property must be your residence. Also, you'll need to comply with a federal timing law—here's the rule:

You must live in the home for over 40 months before filing for bankruptcy. Otherwise, your homestead exemption is capped at $189,050 if you file on or after April 1, 2022 (the amount changes every three years). This cap won't apply if you bought your home with home sales proceeds from that state.

Find out more in Chapter 7 Homestead Exemption in Bankruptcy.

Navigating Your Illinois Bankruptcy Case

Bankruptcy is an unusual area because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.

One way to keep track of your research is to use the bankruptcy forms as an outline. You'll find links to the exemption-related bankruptcy forms and other exemption resources in the chart below. You can also look at the list of Chapter 7 and 13 bankruptcy forms to see where this topic fits in the bankruptcy scheme. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.

Our Suggestions for You

Bankruptcy Articles We Think You'll Enjoy

What Happens in Bankruptcy If I Am on the Deed to Someone Else's Home?

Will I Lose My Checking or Savings Account if I File Bankruptcy?

Will My Bankruptcy Affect My Spouse?

Can I Use My Credit Card Before I File for Bankruptcy?

Timing Your Bankruptcy Filing: When to Delay or Avoid Bankruptcy Altogether

Related Bankruptcy Information

What Happens to Your Property in Bankruptcy?

Will I Lose All My Property If I File for Bankruptcy?

The Motor Vehicle Exemption

The Wildcard Exemption

Chapter 7 Homestead Exemption

Bankruptcy Forms

Schedule A/B: Property

Schedule C: The Property You Claim as Exempt

Statement of Intention for Individuals

Need More Info?

We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by consulting with a local bankruptcy lawyer.

Updated: August 18, 2023

Disability Eligibility Quiz Take our bankruptcy quiz to identify potential issues and learn how to best proceed with your bankruptcy case.
Get Professional Help
Get debt relief now.
We've helped 205 clients find attorneys today.
There was a problem with the submission. Please refresh the page and try again
Full Name is required
Email is required
Please enter a valid Email
Phone Number is required
Please enter a valid Phone Number
Zip Code is required
Please add a valid Zip Code
Please enter a valid Case Description
Description is required

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you