The single most important rule to know in Illinois is this: Illinois does not let you choose the federal bankruptcy exemptions. Under 735 ILCS 5/12-1201, Illinois has formally "opted out" of the menu of federal bankruptcy exemptions found in 11 U.S.C. § 522(d). That means when you file Chapter 7 or Chapter 13 in Illinois, you must protect your property using the Illinois state exemptions (plus certain federal non-bankruptcy exemptions, like Social Security and ERISA retirement protections). The headline Illinois figures are a $15,000 homestead exemption, a $2,400 motor-vehicle exemption, and a $4,000 "wildcard" you can apply to almost anything. These numbers are set by statute and are not indexed to inflation, so they do not change every year the way a minimum wage does.
Why Illinois Forces You to Use State Exemptions
The federal Bankruptcy Code created a national set of exemptions but allowed each state to "opt out" and require its own residents to use state law instead. Illinois is one of roughly two-thirds of states that opted out. Practically, this matters because the federal set is generous in some areas (it has a larger wildcard tied to an unused homestead) and Illinois is more generous in others. You cannot mix and match between the two systems—you are locked into the Illinois set, so planning your filing around Illinois's specific dollar limits is essential.
One nuance: even though you must use Illinois exemptions, the federal non-bankruptcy exemptions still apply on top of them. Those protect things like Social Security benefits, veterans' benefits, federal civil-service retirement, and ERISA-qualified pensions and 401(k) accounts. So a tax-qualified retirement account is generally fully protected regardless of the Illinois dollar caps.
The Homestead Exemption
Illinois's homestead exemption is governed by 735 ILCS 5/12-901. It protects up to $15,000 of equity in a home, condominium, mobile home, or other residence that you own and occupy. If a married couple owns the home jointly and both file, each spouse can claim the exemption, for a combined $30,000 in protected equity. The exemption covers equity—the value of the home minus what you still owe on the mortgage—not the full market value.
The homestead protection also extends to proceeds for a limited time: if your home is sold, destroyed, or condemned, the exemption continues to cover the proceeds for up to one year. Keep in mind the exemption protects against general unsecured creditors and the bankruptcy trustee; it does not erase a voluntary mortgage, a properly recorded mechanic's lien, or certain other consensual liens you agreed to.
The Vehicle Exemption
Under 735 ILCS 5/12-1001(c), you may exempt up to $2,400 of equity in one motor vehicle. As with the home, this applies to equity, not sticker price—if you owe more on the car loan than the car is worth, the trustee has nothing to take and you generally keep the vehicle as long as you stay current with the lender. If your car is paid off and worth more than $2,400, the wildcard exemption (below) can often be stacked on top to cover the remaining equity.
Personal Property and the Wildcard
The Illinois personal-property exemptions are listed in 735 ILCS 5/12-1001:
- Necessary wearing apparel, bible, school books, and family pictures are exempt without a dollar limit (subsection a).
- The wildcard: up to $4,000 in any personal property of your choosing (subsection b). This is the flexible exemption you can apply to a bank account, a second vehicle, extra home equity, jewelry, or anything else that is not otherwise fully covered.
- Tools of the trade: up to $1,500 in implements, professional books, or tools you need for your job (subsection d).
- Health aids: professionally prescribed health aids are fully exempt (subsection e).
- Benefits and support: the right to receive Social Security, unemployment, workers' compensation, veterans' benefits, public assistance, and alimony or child support reasonably necessary for support is protected (subsections g and h).
- Personal-injury awards: up to $15,000 on account of a personal bodily injury, and certain wrongful-death and life-insurance proceeds.
The wildcard is the workhorse of Illinois exemption planning because there is no comparable cash or bank-account exemption. If you have money in a checking account on the day you file, you typically need the wildcard to shield it.