When a resident of Will County considers filing a petition for bankruptcy, one the first concerns is how much personal property will be lost in bankruptcy. For most people, the most important asset is their family home, followed closely by the family vehicle. The Illinois legislature has decreed that certain assets are exempt from the claims of creditors and cannot be taken in a bankruptcy proceeding. Understanding these exemptions can significantly affect the decision to seek protection from creditors in a bankruptcy proceeding.
Exemptions in Illinois
Generally speaking, the Illinois exemptions are useful only in a Chapter 7 proceeding. The single biggest exemption from creditors’ claims in Illinois is the family homestead. Up to $15,000 of the equity in the homestead is exempt from the claims of creditors. The limit is increased to $30,000 if both spouses file bankruptcy petitions.
A similar limit applies to personal property. Most personal property, including clothing, books, and medical aids is totally exempt. Each person also has a “wild card” exemption in the amount of $4,000. Equity in a motor vehicle is exempt up to $2,400.
Wages are exempt up to 85% of gross earnings, or 45 times the federal hourly minimum wage, whichever is greater.
Tax-exempt retirement accounts and various pensions are also completely exempt from claims of creditors.
The federal Bankruptcy Code also contains a list of exemptions. Debtors may choose one list or the other, but they cannot “mix and match.” The debtor must choose to use either the state exemptions or the federal exemptions, but not some of each.
Seeking legal assistance
The choice of exemptions can be complex. The advice of an experienced bankruptcy attorney may be not only helpful but necessary in choosing whether to file under Chapter 7 or Chapter 13.