Illinois Bankruptcy Types

As per the United States bankruptcy court, you may file numerous different types of bankruptcy in Illinois. Chapter 7, Chapter 9, Chapter 13, Chapter 11, Chapter 12, and Subchapter V. But Chapter 7 and Chapter 13 bankruptcy processes are the two that people file for the most frequently.

Illinois Bankruptcy Exemption Laws

As per Illinois bankruptcy laws, you can use a checklist of exemptions, like in every state, to safeguard some assets while declaring bankruptcy, including a home, vehicle, and retirement account. Both under Chapter 7 and Chapter 13, the debtor may exclude particular property from the debtor's estate and from the property subject to sale to pay creditors. You may consult a bankruptcy attorney before filing the bankruptcy petition in the federal courts.

How Illinois Bankruptcy Exemptions Work

The bankruptcy trustee sells nonexempt property in Chapter 7 bankruptcy and distributes the proceeds to creditors. Contrarily, if you file for bankruptcy under Chapter 13, you keep all you possess. However, you are required to pay the greater of the equity worth of the nonexempt property in your repayment plan or your disposable income.

As per Illinois bankruptcy laws, after residing there for more than 180 days, you may petition for bankruptcy. To use Illinois exemptions, you must have resided in the state for at least 730 days prior to filing. If not, you would apply the exclusions from the prior state.

But let's say you didn't reside in a specific state for the two years prior to declaring bankruptcy in Illinois bankruptcy court. If so, you would apply the exemptions from the state you resided in for the majority of the 180 days leading up to the two-year period immediately before you filed your tax return, as per the bankruptcy code (11 U.S.C. § 522(b)(3)(A).)

Illinois Bankruptcy Exemption List

Here are a few Illinois bankruptcy exemptions that Illinois residents frequently rely on. If both spouses own the property and file a combined bankruptcy case, the exemption amount can be increased twice. In addition to the exclusions provided by Illinois bankruptcy laws, you may also use the following:

• The federal non-bankruptcy exemptions.
• The federal COVID-19 recovery rebate exemptions (shields tax credits, child credits, and stimulus payments from bankruptcy).

Unless otherwise specified, all references to the law are to the Illinois Compiled Statutes (ILCS) specified on the website of the Illinois General Assembly. You must consult an experienced bankruptcy lawyer and learn as much as possible about such exemptions.

Illinois Homestead Exemption

By utilizing the Illinois homestead exemption, you can safeguard the value of your home up to $15,000. A residence may be a farm, a mobile home, a building-filled land, a condominium, or a cooperative. The revenues from the sale of a homestead are similarly safeguarded for a year by this exemption. (735 ILCS 5/12-901, 902, 906.)

If you keep your home as tenants by the entirety, you might be able to preserve greater equity. (735 ILCS 5/12-112.)

Illinois Wildcard Exemption

You can use the Illinois Wildcard Exemption to fill in the gaps if an exemption does not cover the non-real estate personal property you wish to retain. A luxury item you couldn't otherwise safeguard can also be protected with it. The wildcard for Illinois costs $4,000. (735 ILCS 5/12-1001(b).)

Illinois Motor Vehicle Exemption

The motor vehicle exemption safeguards an automobile's equity. Up to $2,400 in one motor vehicle can be exempted. (735 ILCS 5/12-1001(c).)

Exemptions on Franchise, Permit, and License Interests

Any funds for Franchise, Permit, and License might be exempted. For example - Your liquor license (235 ILCS 5/6-1.)

Exemptions on Alimony, Support, and Maintenance

The total amount that is required for paying any type of alimony, support, or maintenance might be exempted. (735 ILCS 5/12-1001(g)(4).)

Exemptions on Claims for Negligence or Tortious Conduct

The amount compensated to you for the wrongful death of a dependent might be exempted as long as it is reasonably required for your maintenance. Additionally, you may deduct up to $15,000 from a personal injury award. (735 ILCS 5/12-1001(h)(2),(4).)

Exemptions on Cemeteries and Burial Funds

All pre-need cemetery sales and future care money are exempted. (815 ILCS 390/16; 760 ILCS 100/4; 225 ILCS 45/4a).

Exemptions on Fraternal Benefit Society Benefits

Benefits from fraternal benefit societies are entirely exempted. (215 ILCS 5/299.1a.)

Exemptions for Insurance Benefits

While filing bankruptcy in Illinois, the insured's kid, parent, spouse, or another dependent is the beneficiary, the amount of life insurance, annuity proceeds, or cash value will be exempted as per Illinois bankruptcy laws. (735 ILCS 5/12-1001(f); 215 ILCS 5/238).

The bankruptcy law also enables a spouse or dependent of a filer may receive life insurance proceeds up to the amount required for support. (735 ILCS 5/12-1001(f),(h)(3))

The amount received as Health, disability, or unemployment benefits is also exempted (735 ILCS 5/12-1001(g)(3).).

Exemptions for Personal Property

As per the Illinois bankruptcy court, you might be exempted for the following personal properties:

• Prescribed medication for health purposes
• Necessary clothes
• Family pictures or portraits
• Bibles and textbooks
• A certificate of title for any watercraft longer than 12 feet
• Prepaid tuition trust fund
• Illinois College Savings Pool accounts (625 ILCS 45/3A-7(d); 735 ILCS 5/12-1001.)

#(If below federal gift tax limit - invested more than one year before filing bankruptcy )

#(If above federal gift tax limit - two years before filing bankruptcy).

Exemptions for Partnership Property

The Uniform Partnership Act exempted a partner's interest in a particular property besides personal property. Illinois bankruptcy laws passed this act. (805 ILCS 205/25.)

Exemptions for Pension and Retirement Benefits

Pensions for specific employees are exempted; they include:

• Police
• Judges
• Prison guards
• Firefighters
• Municipal workers
• Staff members of cities, counties, and states
• Members of labor unions and retirement boards
• Employees of sanitary districts and parks
• Staff members of state universities and teachers
• Members of the General Assembly
• Staff members of public libraries

(As per bankruptcy code 40 ILCS 5/2-154; 5/3-144.1; 5/3-135/; 5/5-218; 5/6-213; 5/7-217; 5/8-244; 5/9-228; 5/11-223; 5/12-190; 5/12-704; 5/13-213; 5/13-805; 5/14-147; 5/15-185; 5/16-190; 5/17-161; 5/19-117; 5/19-218; 5/22-230; 735 ILCS 5/12-704; 735 ILCS. 5/12-1006.)

Qualified 401(k) and IRA accounts are exempted under section (735 ILCS 5/12-1006.) Federal bankruptcy law also declares them exempt in every state, regardless of the exemption scheme in place.

Exemptions for Public Assistance

As per federal law, the child tax credit and earned income tax credit are 100% exempted, but only if you haven't already received the money. (305 ILCS 5/11-3); 735 ILCS 5/12-1001. (In re Fish, 224 B.R. 82 (Bankr. S.D. Ill 1998); In re Vasquez, No. 13-32174 (Bankr. N.D. Ill 2014).)

Exemptions for Trade Exemptions

All your trade-related instruments, including professional books, are exempt from up to $1,500. (735 ILCS 5/12-1001.) As per federal exemptions, guns and uniforms of the National Guard are likewise excluded. (20 ILCS 1805/10.)

Exemptions for Unemployment Compensation

You can exclude 100% of all jobless benefits except for some child support claims. (820 ILCS 405/1300; 735 ILCS 5/12-1001).

Exemptions for Wages

You may exclude up to 85% of your gross income from taxation or 45 times the federal minimum weekly wage, whichever is higher. (740 ILCS 170/4; 735 ILCS 5/12-803).

Exemptions for Workers' Compensation

As per bankruptcy courts, all claims and awards for workers' compensation, including those for occupational disorders, are entirely exempted. (820 ILCS 305/21.)

Exemptions for Veterans Benefits

Benefits for veterans are entirely exempt. (735 5/12-1001(g)(2).)