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Bankruptcy: Illinois

The goal of filing bankruptcy in Illinois is two-fold.  First, it gives honest debtors a chance to be relieved of crippling debt, and second it repays creditors to the extent that the debtor’s property value or earnings permit. 80,663 bankruptcies were filed in Illinois in 2010, ranking Illinois 11th in the country for the number of bankruptcy filings per capita. 76% of Illinois’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Illinois

Bankruptcy in Illinois is governed by federal law and all bankruptcy cases are filed in the US Bankruptcy Courts in:

  • Illinois Central District Court:  Bloomington, Danville, Decatur, Galesburg, Kankakee, Paris, Peoria, Quincy, Rock Island, Springfield
  • Illinois Northern District Court: Chicago, Joliet, North Aurora, Rockford, Waukegan, Wheaton
  • Illinois Southern District Court: Alton, Benton, East St. Louis, Effingham, Mt. Vernon

Although the federal courts have jurisdiction over bankruptcy proceedings, Illinois law prohibits petitioners from using exemptions found in the U.S. bankruptcy code, instead requiring the use of Illinois bankruptcy exemptions. With the guidance of a bankruptcy attorney Illinois debtors can gain a full understanding of what personal property they are permitted to hold in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Illinois

Chapter 7 bankruptcies in Illinois are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Illinois’ bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Illinois’ Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Illinois Bankruptcy Exemptions

Illinois bankruptcy law designates property exemptions that allow petitioners to retain certain personal property and assets so they may move forward from bankruptcy as productive members of society.  That is, the creditors cannot force debtors to sell the shirt off their back.  Bankruptcy in Illinois permits petitioners to choose the appropriate exemptions from the state list.

Property exemption values are subject to change; for up-to-date information, it is advisable to meet with an Illinois bankruptcy attorney to discuss options.  Illinois bankruptcy exemptions include:

Illinois Homestead Exemption

  • $15,000 total: Real or personal property including a farm, lot, and buildings, condo, co-op, or mobile home (Husband and wife may double)
  • Sale proceeds exempt for 1 year
  • Spouse or child of deceased owner may claim homestead exemption

Illinois Tenancy by Entirety Exemption

  • Tenancy by entirety property exempt except against joint debts

Illinois Personal Property Exemption

  • $2,400 total: Motor vehicle
  • $15,000 total: Personal injury recoveries
  • Bible, family pictures, schoolbooks and clothing
  • Pre-need cemetery sales funds, care funds, and trust funds
  • Prepaid tuition trust fund
  • Health aids
  • Proceeds of sold exempt property
  • Wrongful death recoveries

Illinois Tools of the Trade Exemption

  • $1,500 total: Implements, books and tools of trade

Illinois Wage Garnishment Exemption

  • 85% of earned but unpaid weekly wages or 45 times the federal minimum hourly wage (Low-income debtors may be authorized for more)

Illinois Public Benefits Exemption

  • Social Security, Public assistance and Aid to aged, blind, disabled
  • Workers’ and Unemployment compensation
  • Workers’ occupational disease compensation
  • Illinois College Savings Pool accounts, invested more than 1 year prior to filing and below federal gift tax limit (or 2 years if more than federal gift tax limit)
  • Veterans’ benefits
  • Restitution payments on account of WWII relocation of Aleuts and Japanese Americans
  • Crime victims’ compensation

Illinois Insurance Exemption

  • $7,500 total: Homeowners’ proceeds if home destroyed
  • Health or disability benefits
  • Fraternal benefit society benefits
  • Life insurance proceeds to a spouse or dependent of debtor to extent needed for support
  • Life insurance, annuity proceeds, or cash value if beneficiary is insured’s child, parent, spouse, or other dependent

Illinois Pensions and Retirement Savings Exemption

  • All tax-exempt retirement plans including IRAs, government and church plans
  • Park, Public and Civil service employees
  • Firefighters, Police officers, Judges, Teachers
  • State, County and Municipal employees
  • Disabled firefighters; widows and children of firefighters
  • House of correction employees, Public library employees, State Sanitation district employees, State university employees and General assembly members

Illinois Miscellaneous Exemption

  • Alimony and child support

Illinois Wild Card Exemption

  • $4,000: Any personal property, excluding wages

Chapter 13 Bankruptcy, Illinois

In 2010, 24% of petitioners filed for protection under Chapter 13 bankruptcy laws in Illinois.  When a debtor files Chapter 13 bankruptcy in Illinois, a court-appointed Trustee restructures the petitioner’s debts and implements a 3-5 year repayment plan, assigning the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in Illinois keep most – or all – of their property.

How to File Bankruptcy in Illinois

Eligibility for property exemptions ought to be a significant consideration when deciding if bankruptcy is a practical answer to a debtor’s financial problems. The objective is to find a solution that will preserve major assets and qualify debts for discharge. Since every case is unique, an Illinois bankruptcy attorney can help debtors understand the complexity of their financial situations and advise whether Chapter 7 or Chapter 13 bankruptcy are among the best options in their circumstances.

Bankruptcy Attorney: Illinois

It is the debtor’s duty to know their privileges and obligations as bankruptcy petitioners.  An Illinois bankruptcy attorney can interpret and simplify the federal laws and state exemptions for those considering filing bankruptcy.  Because personal bankruptcy cases are intricate and nerve-racking, investing in the counsel and support of a trusted Illinois bankruptcy attorney is highly recommended.