Illinois Bankruptcy Exemptions: What You Actually Get to Keep

Exemptions are the heart of every bankruptcy case. They are the legal rules that decide which of your assets a trustee can sell and which stay with you. Illinois is one of about two dozen states that has opted out of the federal exemption scheme — meaning Illinois filers must use Illinois exemptions, not the federal list you may have read about online.

The good news: for most working households, Illinois exemptions are enough to protect everything they own. The catch is that they are scattered across the statute and adjusted for inflation, so the numbers you find in older articles are often out of date. Below is a plain-English summary of the categories that matter most.

Homestead — up to $15,000 of equity

Illinois protects up to $15,000 of equity in your primary residence ($30,000 for a married couple filing jointly on a home they both own). Equity is market value minus what you owe. If your home is worth $260,000 and you owe $240,000, you have $20,000 of equity — $15,000 is protected, and the remaining $5,000 is analyzed against cost of sale and trustee fees before any risk arises.

Motor vehicle — $2,400 per debtor

Each filer can protect $2,400 of equity in one motor vehicle. A joint filing couple with two cars can shield $4,800 total, split however they choose. Financed cars usually have little or no equity and pass through Chapter 7 without issue as long as payments stay current.

Wildcard — $4,000 in any personal property

The wildcard is the most flexible tool in Illinois: $4,000 of equity in any personal property (not real estate). It is commonly stacked on the vehicle exemption for a paid-off car, or used to protect a tax refund, a bank balance, or a small collection.

Wages — 85% of gross

Wages earned but unpaid at the filing date are protected up to 85% of gross, or 45 times the state minimum wage per week — whichever is greater. This matters when you file mid-pay-period.

Retirement accounts — unlimited

ERISA-qualified retirement accounts are fully exempt without a dollar cap: 401(k), 403(b), 457, pensions, and traditional and Roth IRAs (the IRA cap under federal law is over $1.5 million and adjusts every three years — well above most filers' balances). Do not cash these out before filing.

Household goods, clothing, tools of the trade

• Necessary wearing apparel, family pictures, schoolbooks — no dollar limit
• Prescribed health aids — no dollar limit
• Tools of the trade — $1,500
• Professionally prescribed health aids for the debtor and dependents

Trustees almost never pursue used furniture or clothing. Their secondhand value is low, and the cost of sale eats any recovery.

Public benefits and support

• Social Security, unemployment, workers' compensation — fully exempt
• Public assistance and veterans' benefits — fully exempt
• Child support and alimony reasonably necessary for support
• Life insurance proceeds and annuities reasonably necessary for support

Personal injury claims

Up to $15,000 of a personal injury recovery is exempt. If you have a pending injury claim at filing, disclose it — undisclosed lawsuits are one of the most common reasons discharges are revoked years later.

In more than three decades of practice, the vast majority of our Chapter 7 clients keep everything they own. Exemptions exist precisely to make that possible.

How exemptions work in Chapter 13

Chapter 13 does not sell your assets, but exemptions still matter. The best-interest-of-creditors test requires that unsecured creditors receive at least what they would have gotten in a Chapter 7 liquidation. If you have non-exempt equity, the plan must repay unsecured creditors an equivalent amount over three to five years.

Get a real analysis

These numbers change. Homestead has been debated in Springfield for years, and wildcard has crept up with inflation. A short consultation will produce a written exemption schedule that maps your actual assets to current Illinois law — so you know exactly what is at risk before filing.