Illinois bankruptcy exemptions are the state-law dollar limits that decide what property you keep when you file. Illinois requires filers to use its own exemption list rather than the federal one written into the Bankruptcy Code, and the key figures changed on January 1, 2026, when Public Act 104-120 took effect. The homestead exemption jumped from $15,000 to $50,000 per person, and several other categories were raised at the same time. Working from last year’s numbers can cost you property you were entitled to keep.
Home Equity: The Homestead Exemption
An individual can protect up to $50,000 of equity in a primary residence. When two or more people co-own the property, the combined exemption caps at $100,000, divided proportionally by each owner’s share.1Illinois General Assembly. Illinois Code 735 ILCS 5/12-901 – Amount The exemption covers houses, condominiums, cooperatives, mobile homes, and personal property you occupy as a residence.
The number that matters is equity, not market value. Equity is what the home is worth minus your mortgage balance and any other liens. A house worth $300,000 with a $270,000 mortgage has $30,000 in equity, comfortably inside the $50,000 limit for a single filer. If equity exceeds the exemption, a Chapter 7 trustee can sell the home to pay creditors, and you receive your exempt share from the proceeds.
You must actually occupy the property as your residence for the homestead exemption to apply. If you sell the home shortly before or during bankruptcy, the sale proceeds remain exempt for up to one year from the date of sale, giving you a window to reinvest in a new residence.
Your Car: The Motor Vehicle Exemption
You can protect up to $3,600 in equity in one motor vehicle.2Illinois General Assembly. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt Again, equity means current market value minus what you still owe on the loan. If you own two cars, the motor vehicle exemption covers only one of them, though the wildcard exemption can often bridge the gap.
Married couples filing jointly can double this amount when both spouses hold title, so a jointly owned car can carry $7,200 in protected equity. That doubling principle runs through most personal property categories and often makes joint filing valuable when both spouses have ownership interests.
The Wildcard Exemption
The wildcard exemption under Section 12-1001(b) gives you $4,000 to protect any personal property that doesn’t fit another category.2Illinois General Assembly. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt Cash in a bank account, a tax refund, furniture, jewelry, electronics, equity in a second car — the wildcard reaches all of it. The first $1,000 of that $4,000 is applied automatically under a companion provision in Section 12-1001.1.
This is where planning pays. If your car has $5,800 in equity, you can stack the $3,600 motor vehicle exemption with $2,200 from the wildcard and cover the full amount. The same stacking works for any category where your equity slightly exceeds the specific cap. One limit: the wildcard applies only to personal property. It cannot protect real estate equity beyond what the homestead already covers.
Joint filers who both own the property can double the wildcard to $8,000, a meaningful cushion for households with modest savings or accumulated belongings. The wildcard often decides whether a Chapter 7 case is genuinely a “no asset” case or whether the trustee has something to liquidate.
Other Personal Property
Several other categories carry their own caps or full protection under 735 ILCS 5/12-1001:2Illinois General Assembly. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt
- Tools of the trade: up to $2,250 in equity for professional books, tools, or implements used to earn a living. This covers everything from a plumber’s wrenches to an accountant’s reference library.
- Necessary personal items: clothing, Bibles, schoolbooks, family pictures, and professionally prescribed health aids are fully exempt with no dollar cap. A trustee cannot seize glasses, hearing aids, or family photo albums regardless of value.
Retirement Accounts
Retirement savings get the broadest protection Illinois offers. Under 735 ILCS 5/12-1006, any interest in a retirement plan created in good faith to qualify under the Internal Revenue Code is fully exempt from creditor claims with no dollar cap.3Illinois General Assembly. Illinois Code 735 ILCS 5/12-1006 – Retirement Plans That covers:
- Employer-sponsored plans: 401(k)s, 403(b)s, profit-sharing plans, stock bonus plans, and pension plans.
- Individual accounts: traditional IRAs, Roth IRAs, and individual retirement annuities.
- Government and church plans: public employee pensions under the Illinois Pension Code and church retirement plans.
- Self-employed plans: SEP-IRAs, SIMPLE IRAs, and Keogh plans.
The statute treats qualifying retirement plans as spendthrift trusts under Illinois law, meaning creditors cannot attach them even outside bankruptcy. Decades of retirement savings are safe from a bankruptcy trustee.
Illinois also protects 529 college savings accounts, with restrictions. Contributions made more than one year before filing are generally exempt if the amount stays below the federal gift tax limit; larger contributions need a two-year lookback to qualify. If you’ve recently added money to a 529, the filing date matters.
Life Insurance
Life insurance policies where the beneficiary is a spouse, child, or dependent of the insured receive protection. The cash surrender value and any proceeds payable on a claim are generally shielded from creditors. A policy naming your estate as beneficiary rather than a specific dependent may not receive the same protection, so beneficiary designations are worth reviewing before you file.
Public Benefits and Support Payments
Government benefits and family support payments are almost entirely off-limits to creditors. Fully exempt under Illinois law:2Illinois General Assembly. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt
- Social Security benefits
- Unemployment compensation
- Public assistance payments
- Veterans’ benefits
- Disability or illness benefits
These funds stay protected after deposit into a bank account, which matters in practice. Trustees sometimes scrutinize bank balances, so you’ll want to be able to trace exempt deposits back to their source. Alimony and child support are also exempt to the extent reasonably necessary to support you and your dependents.
The Earned Income Tax Credit is treated as exempt public assistance under Illinois law, and federal bankruptcy courts here have consistently treated EITC refunds the same way. A tax refund built primarily from EITC is not available to your creditors.
Illinois also gives stronger wage protection than federal law. A judgment creditor can take only the lesser of 15% of your gross weekly pay or the amount by which your disposable earnings exceed 45 times the applicable minimum wage, compared with 25% under federal law.4Illinois General Assembly. Illinois Code 735 ILCS 5/12-803 – Maximum Wages Subject to Collection Below 45 times minimum wage, no garnishment at all.
Personal Injury and Wrongful Death Recoveries
Money from a personal injury claim, whether settlement or judgment, is exempt up to $22,500 per person.2Illinois General Assembly. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt The exemption applies to compensation for bodily injury to you or to someone you depended on for support. Punitive damages and the property damage portion of a settlement fall outside it.
Wrongful death recoveries are also protected as exempt personal property when the deceased financially supported you. Timing between receiving these funds and filing affects how they’re classified, so a pending settlement and a planned filing need to be coordinated carefully.
Two Rules That Can Block Illinois Exemptions
Before any Illinois exemption applies to your case, you have to satisfy a federal residency rule. Under the Bankruptcy Code, you can use a state’s exemptions only if you’ve lived there for the full 730 days before filing your petition.5Office of the Law Revision Counsel. 11 USC 522 – Exemptions If you moved to Illinois less than two years ago, you may be stuck using the exemptions of your previous state, or in some situations a limited set of federal exemptions. Count backward from your intended filing date and make sure you clear that 730-day mark.
Illinois has also opted out of the federal bankruptcy exemption list found in Section 522(d) of the Bankruptcy Code. You cannot pick and choose between the Illinois list and the federal list. You’re limited to Illinois exemptions plus federal nonbankruptcy exemptions, which are separate protections scattered through federal statutes for things like Social Security benefits and certain veterans’ pensions.
How Exemptions Work in Chapter 7 vs. Chapter 13
In a Chapter 7 case, exemptions are the line between what you keep and what gets sold. The trustee looks at everything you own, subtracts exempt property, and liquidates the rest to pay creditors. If everything you own falls within exemption limits, the trustee has nothing to sell and your case is a “no asset” case. Most consumer Chapter 7 cases in Illinois end up this way, but only because the filer planned their exemptions carefully.
Chapter 13 works differently. You keep all your property regardless of whether it’s exempt. In exchange, you commit to a three-to-five-year repayment plan. Exemptions still matter here because of the “best interest of creditors” test: your plan must pay unsecured creditors at least what they would have received in a Chapter 7. If you own $20,000 in non-exempt assets, your Chapter 13 plan has to distribute at least $20,000 to unsecured creditors over its term. The more non-exempt property you own, the more expensive your plan.
Either way, knowing the exact dollar limits and stacking exemptions correctly is what separates a smooth filing from a painful surprise at the creditors’ meeting.