Your Assets

Filing for bankruptcy, even under Chapter 7, does not mean that you will lose all of your property. In a chapter 7 filed by an Illinois debtor, the law allows you to keep your exempt property. Exempt property is certain property that is out of the reach of your creditors pursuant to Illinois Law (see the list of Illinois exemptions below).

The following is a summary of exempt property of Illinois debtors:

Your Homestead Exemption

Every individual is entitled to up to $15,000 (to the extent of its value) of his or her homestead. If 2 or more people share a homestead then each individual is entitled to the value of each proportionate share (based on ownership percentage) not to exceed $30,000. But keep in mind that no homestead property is exempt from real estate taxes or assessments (including certain condominium assessments) and the homestead exemption can be waived by written agreement (for example, you most likely waived your homestead exemption in your home mortgage).

Your Personal Property Exemptions

The following personal property is a list of other exempt property:

  1. necessary wearing apparel, bible, school books, and family pictures of you and your dependents;
  2. up to $4,000 in value, in any other property (called the “wildcard exemption” which can be applied by you to any property not otherwise already fully covered by another exemption);
  3. your interest, not to exceed $2,400 in value, in any one motor vehicle;
  4. your equity interest, not to exceed $1,500 in value, in any implements, professional books, or tools of your trade;
  5. Professionally prescribed health aids for you or a dependent;
  6. Interest in qualified retirement plans (i.e. pensions, IRAs, profit sharing, etc.);
  7. All proceeds payable because of the death of the insured and the aggregate net cash value of any or all life insurance and endowment policies and annuity contracts payable to a wife or husband of the insured, or to a child, parent, or other person dependent upon the insured, or to a revocable or irrevocable trust which names the wife or husband of the insured or which names a child, parent, or other person dependent upon the insured as the primary beneficiary of the trust, whether the power to change the beneficiary is reserved to the insured or not and whether the insured or the insured’s estate is a contingent beneficiary or not;
  8. Your right to receive:
    1. a social security benefit, unemployment compensation, or public assistance benefit;
    2. a veteran’s benefit;
    3. a disability, illness, or unemployment benefit; and
    4. alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.
  9. Your right to receive, or property that is traceable to:
    1. an award under a crime victim’s reparation law;
    2. a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor;
    3. a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor or a dependent of the debtor;
    4. a payment, not to exceed $15,000 in value, on account of personal bodily injury of the debtor or an individual of whom the debtor was a dependent; and
    5. any restitution payments made to persons pursuant to the federal Civil Liberties Act of 1988 and the Aleutian and Pribilof Island Restitution Act, P. L. 100-383.
  10. The debtor’s right to receive an award under Part 20 of Article II of this Code relating to crime victims’ awards.
  11. Moneys held in an account invested in the Illinois College Savings Pool of which you are a participant or donor, except the following non-exempt contributions:
    1. any contribution to such account by the debtor as participant or donor that is made with the actual intent to hinder, delay, or defraud any creditor of the debtor;
    2. any contributions to such account by the debtor as participant during the 365 day period prior to the date of filing of the debtor’s petition for bankruptcy that, in the aggregate during such period, exceed the amount of the annual gift tax exclusion under Section 2503(b) of the Internal Revenue Code of 1986, as amended, in effect at the time of contribution; or
    3. any contributions to such account by the debtor as participant during the period commencing 730 days prior to and ending 366 days prior to the date of filing of the debtor’s petition for bankruptcy that, in the aggregate during such period, exceed the amount of the annual gift tax exclusion under Section 2503(b) of the Internal Revenue Code of 1986, as amended, in effect at the time of contribution.

Your Home

Filing bankruptcy does not necessarily mean you will lose your home. Many Chapter 7 debtors simply continue to pay their mortgage loan payments during and after filing for bankruptcy and do not face home foreclosure. In some instances, for example if you have significant equity in your home or if you are behind in your mortgage loan payments, you may consider filing Chapter 13 in order to cure home mortgage loan arrears, keep your home and continue to make payments under a Chapter 13 plan.

Your Car

Filing bankruptcy does not necessarily mean you will lose your car. Many Chapter 7 debtors simply continue to pay their auto loan payments during and after filing for bankruptcy and do not face losing their car to repossession. In some instances, you may consider seeking to reaffirm your auto loan in a Chapter 7 or filing Chapter 13 in order to cure auto loan arrears and then continue to make payments under a Chapter 13 plan.

See our blog regarding avoiding liens on otherwise exempt property.

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