Many people fear that they will be left with nothing after they file for bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code. Fortunately, this is not the case. Illinois provides several important exemptions to bankruptcy that can let you keep your most important assets.
Chapter 7 provides a very powerful and fast way to get out of debt. However, one of its drawbacks is that it requires you to lose some of your assets. For this reason, it is sometimes known as a liquidation bankruptcy.
When you file for bankruptcy, a trustee takes over control of your nonexempt property and decides how to satisfy your creditors by selling it off.
Under Illinois’ bankruptcy exemptions law, certain types of property are exempt from the trustee’s process, meaning that you get to keep them. The types of property involved are mostly the kinds of things you will need to maintain a place to live and keep your job. And so, typically, you can keep your clothing, furniture, houseware and many other types of personal property.
Pensions and certain kinds of public benefits are exempt, as are some kinds of insurance benefits. Up to 85% of your wages are exempt.
There’s also something known as a wildcard exemption which allows you to exempt up to $4,000 in property that doesn’t fit under other exemptions.
For more expensive types of property, the exemptions are more complicated. For example, the exemptions allow you to keep some equity in your car. The equity in your car consists of the difference between what you paid for it and what you owe on it. If you’re filing individually, you can keep your car’s value up to $2,400. If you are filing as a married couple, you can keep $4,800. Depending on how much you owe on your car, this exemption may allow you to keep it.
The homestead exemption is even more complex. It allows you to keep up to $15,000 in equity in your home (twice that amount for married couples). Depending on how much you owe on your home, you may be able to use this exemption to keep your place of residence.