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The basics of bankruptcy exemptions under Illinois law

On Behalf of | May 12, 2022 | Bankruptcy |

Many Illinois residents who are contemplating filing a bankruptcy petition worry about whether the proceeding will render them penniless. The comforting answer is that neither Chapter 7, which involves the total discharge of most of the petitioner’s debts and Chapter 13, which involves using the petitioner’s assets to pay down existing debts, will strip a petitioner of all assets. One of the major reasons for this conclusion is the fact that both federal and Illinois law allow the petitioner to declare certain assets exempt from the claims of creditors.

Which set of exemptions should an Illinois resident use?

In many states, the petitioner is allowed to choose between the federal set of exemptions and the state set. The rule in Illinois is a bit different. No one who has lived in Illinois for more than two years can use the federal exemptions; these individuals must use the state exemptions.

The treatment of the homestead

Most bankruptcy filers worry most about losing the family residence. Under current law, a bankruptcy petitioner can protect up to $15,000 in equity in a home. Married couples can claim up to $30,000 as exempt from creditor claims. Illinois also has a “wild card exemption” that permits a person to claim an exemption of $4,000 on any asset.

This wild card exemption is often used to permit the petitioner to increase the amount of equity in the homestead that can be protected from creditor’s claims.

Motor vehicle exemption

An Illinois resident may protect the equity in a motor vehicle up to $2,400 for an individual and up to $4,800 for a married couple filing a joint petition.

Personal property exemptions

Books, clothing, prescribed health aids, and tools of the trade are exempt, regardless of their value. Certain college savings accounts are exempt. Retirement accounts may also be exempt, depending upon the nature of the organization that provides the benefit.

Solid advice of an experienced bankruptcy attorney

The complexity of the list of exemptions makes consulting an experienced bankruptcy attorney an obvious necessity before the petition is filed.