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Six Key Illinois Bankruptcy Exemptions


Millions of people are saddled with excessively high unsecured debts through no fault of their own. Some people have very high medical bills. Other people had to rely on credit cards during a period of unemployment. These people should at least consider filing Chapter 7 bankruptcy, but they are afraid they will lose important assets.

Technically, the trustee (person who oversees the bankruptcy for the judge) may seize your assets in a Chapter 7 and sell them to repay your creditors. But the Bankruptcy Code limits that ability to nonexempt assets. Since most people do not have nonexempt assets, most people have nothing to worry about.


In Illinois, married debtors can exempt up to $30,000 in home equity. There’s a difference between equity and fair market value. Your house may be worth several hundred thousand dollars, but unless you have lived in it for more than ten years, you probably have very little equity in the property. The tenancy of the entirety loophole may protect even more home equity. In these situations, the married couple owns the home instead of two separate individuals. Under state law, creditors cannot seize joint property to pay one owner’s debts, regardless of the bankruptcy exemption amount.

Retirement Account

The Supreme Court recently reaffirmed that these accounts are entirely exempt, regardless of their value. That applies to a full array of retirement nest eggs, including:

  • – Pension plans,
  • – 401(k)s, and
  • – IRAs

This exemption is especially important because many retirement accounts have an emotional value which may eclipse their financial value. If you are considering bankruptcy, it may be a good idea to increase contributions to your retirement account. However, speak with your attorney before you do so, to avoid breaking any bankruptcy-related rules.

Motor Vehicle

The $2,400 exemption amount ($4,800 for a married couple) seems very small. But just like the homestead exemption, this figure represents the equity in the vehicle. As a rule of thumb, new cars have almost no equity and used cars have almost no value. Either way, you are probably protected.

Current Wages

Illinois has one of the best wage exemption laws in the country. Debtors may exempt up to 85 percent of their current wages. In other words, the money you earn belongs to you and not to the bankruptcy court.

Wildcard Exemption

Illinois also has a very generous wildcard exemption. Debtors may apply this $4,000 exemption to otherwise non-exempt property. This list includes thing like:

  • – Equity in a vacation cabin,
  • – An otherwise non-exempt motor vehicle, and
  • – Cash in a savings account.

The wildcard exemption is also easy to use. It applies to any property, regardless of its character or ownership.

Domestic Support Obligations

A generation ago, this exemption was an obscure provision that few people cared about. Today, it affects about half the households in Illinois. The DSO exemption benefits people who receive support and people who pay support. Bankruptcy does not affect your right to receive DSO payments. Consider putting these payments in a separate account. Furthermore, the exemption applies to “reasonable” DSO payments. If you expect to pay over and above the required amount, you may set aside an appropriate amount of money.

Reach Out to Diligent Lawyers

Bankruptcy protects most of your assets. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

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