For many individuals struggling with debt, one of the biggest concerns about bankruptcy is all about losing the assets that they’ve worked so hard to acquire. There are a lot of myths and misconceptions out there about bankruptcy – and one of the oldest, biggest, and most damaging is that filing for bankruptcy will always mean having to give up all of your personal belongings and assets.
In reality? Many people who file for bankruptcy are ultimately able to hang on to most, if not all, of their most important possessions, largely thanks to the power of state and federal exemptions.
Before we dive into exemptions for the state of Illinois, it’s important to clarify a few key things about bankruptcy. To begin with, it’s essential to note that there are different types of bankruptcy filings available to consumers. Chapter 13 bankruptcy, often called reorganization bankruptcy, typically allows a debtor to hold on to all of their assets, in exchange for restructuring their debts and agreeing to a firm repayment schedule over a number of years.
Chapter 7 bankruptcy, also commonly called liquidation bankruptcy, is a different matter altogether. In Chapter 7 bankruptcy, a debtor’s case is overseen by a bankruptcy trustee, who is often responsible for selling the debtor’s property in order to pay debts to creditors. However, it’s important to note that a trustee is only able to sell nonexempt property. With the assistance of an experienced bankruptcy attorney, debtors can generally take advantage of Illinois’ broad list of bankruptcy exemptions in order to protect as much of their property as possible.
With that being said, it’s also crucial to remember that there is a strategy involved in using exemptions. There are certainly instances in which a trustee may object to a debtor claiming certain objections, and it’s key to keep in mind that exemptions are intended to protect the items that are clearly necessary for a debtor to maintain their job and keep their household functional – not necessarily to maintain a lifestyle or standard of living.
So, with all that in mind, what are some of the common exemptions available to those seeking bankruptcy in the state of Illinois? As referenced in the Illinois Compiled Statutes (ILCS) – available for perusal in full here, via the Illinois General Assembly – a debtor may able to employ exemptions including:
The Illinois Homestead Exemption.
This exemption allows a debtor to preserve equity up to $15,000 in a primary residence.
The Illinois Motor Vehicle Exemption.
This exemption allows debtors to preserve equity in a car, truck, or vehicle, up to $2400.
Other Property Exemptions.
Broadly speaking, a debtor may be able to exempt a wide array of personal property and miscellaneous assets, depending on their circumstances. This might include:
- Alimony and child support payments
- Business property and “tools of trade”
- Family pictures, clothing, religious books, and other personal items
- Health aids
- Earned wages (85% or more of earned but unpaid weekly wages)
- Awards from certain lawsuits and settlements (such as a wrongful death suit or personal injury recovery)
- “Wildcard” exemptions (broadly speaking, can be used to protect any personal property, such as a nonexempt luxury item, up to $4000)
A debtor may be able to exempt certain insurance benefits, including:
- Health and/or disability benefits
- Life insurance proceeds to spouse, child, or dependent
- Homeowners’ proceeds from destruction of home (up to $15,000)
- Fraternal society benefits
Pension and Benefit Exemptions.
Broadly speaking, a debtor may be able to exempt certain retirement accounts, public benefits, and pensions, including:
- Social Security
- Unemployment benefits
- Veterans’ benefits
- Workers’ compensation benefits
- Aid to aged, blind, disabled
- IRAs and tax-exempt retirement accounts (under federal law)
- Pensions for civil service employees, police and firefighters, park employees, state and county employees, teachers, correctional employees, and others
Getting a Handle on Your Unique Circumstances
It’s important to note that the above list is intended only to be a broad overview of possible exemptions under Illinois law, and is not meant to be read as comprehensive or complete in any way. It’s also key to understand that everyone’s circumstances will be unique when it comes to filing for bankruptcy, and many people will have differing experiences overall. Finally, bear in mind that state laws are always changing, and the above list may be out of date by the time you read it.
In many cases, the best way to determine if you qualify for bankruptcy, and what strategies to pursue in bankruptcy, may be to consult with an experienced legal professional in your local area.
With a bankruptcy attorney on your side, there is no need to search for all the variables and hope you don’t miss any key detail, or to waste your time seeking out costly and ineffective third party remedies. Instead, an attorney can help you pursue the right course of action for your unique financial situation; legal professionals can also offer the force of law to protect you from creditors, all while being held to a higher standard by the state and ethics review boards.
If you’re looking to get a better understanding of bankruptcy, and whether or not it may be a practical course of action for you, do not hesitate to get in touch with the Gunderson Law Firm with any questions you may have. We can get you actual, straightforward answers, tailored for your personal situation.
Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you, so you can enjoy life again. At the Gunderson Law Firm, we protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve. We can take all steps possible to protect you and your assets immediately and throughout the bankruptcy process, while also counseling you on realistic ways to avoid such serious debt issues in the future.