What Are the Illinois Bankruptcy Exemptions?

Why Are Illinois Bankruptcy Exemptions Important? 

Bankruptcy exemptions help protect the property you need to live and work if you file for Chapter 7 bankruptcy. Chapter 7 is often called “liquidation” bankruptcy because the trustee can sell non-exempt property to repay creditors. In reality, most people who file Chapter 7 don’t lose anything, thanks to exemptions.

👥 If you're married and filing jointly in Illinois, you can double the exemption amounts as long as you own the property together.

💻 If learning about exemptions feels overwhelming and you just want help filing your case, see if you qualify to use Upsolve’s free filing tool. Upsolve has helped over 20,000 people erase more than $944 million in debt — and it's 100% free.

Can Illinois Residents Use the Federal Bankruptcy Exemptions?

Illinois doesn’t allow residents to use the federal bankruptcy exemptions. If you’ve lived in Illinois for at least two years, you’re required to use the state’s exemption system when filing for Chapter 7 bankruptcy.

✅ The good news is that Illinois offers relatively generous exemptions that can help protect essential property like your home, vehicle, and personal belongings.

You can also use federal non-bankruptcy exemptions to protect certain benefits, such as Social Security, veterans' benefits, and most retirement accounts.

What Are the Illinois Bankruptcy Exemptions?

Bankruptcy exemptions help protect the property you need to live and work. This includes personal property like clothing, furniture, and some equity in your car. Exemptions also cover real property, such as your home or land, and certain financial benefits like wages, retirement accounts, and public assistance.

Real Property: The Illinois Homestead Exemption

🏠 The homestead exemption protects the equity you have in a home or land that you own and live in.

As of now, you can protect up to $15,000 in equity. If you’re married, filing jointly, and own the home together, you can double this to $30,000.

Starting Jan. 1, 2026, these amounts will increase to $50,000 for individuals and $100,000 for joint filers, giving homeowners significantly more protection.

To calculate your home equity, subtract what you owe on the mortgage from the current market value of the home. If your equity is within the exemption amount, your home is generally protected during a Chapter 7 bankruptcy.

📘 Source: 735 ILCS 5/12-901 (as amended by P.A. 104-120, effective Jan. 1, 2026)

Personal Property Exemptions

Illinois’ personal property exemption lets you protect certain items you own that are considered essential for daily life or work.

👕 In Illinois, the following personal property is fully exempt:

• Necessary clothing

• A Bible, school books, and family pictures

• Health aids that are professionally prescribed

🛠️ There is also a tools of the trade exemption that lets you protect up to $1,500 in tools or equipment you use for your job. This amount will increase to $2,250 starting in January 2026.

📘 Source: 35 ILCS 5/12-1001(a)(d)(e)

Motor Vehicle

🚗 Illinois’ motor vehicle exemption lets you protect up to $2,400 of equity in one car. Equity is the value of your car after subtracting any loan balance. So, if your car is worth $5,000 and you still owe $3,000 on it, your equity is $2,000.

This exemption amount will increase to $3,600 starting in January 2026.

If your equity is higher than the exemption allows, some filers use the wildcard exemption to protect the remaining amount.

📘Source: 735 ILCS 5/12-1001(c)

Wildcard Exemption

🎯 Illinois filers can use a wildcard exemption of up to $4,000 to protect personal property that isn’t already covered by another exemption. People often use this to protect extra equity in a car, money in a bank account, or a valuable personal item.

🆕 Starting Jan. 1, 2026, the law will automatically apply $1,000 of that $4,000 wildcard exemption to one item of personal property — even if you don’t list it or claim it. This change gives filers a little built-in protection in case they forget to claim an exemption.

❌ There are a few exceptions. You can’t use the wildcard exemption to protect real estate or wages. 

📘 Sources: 735 ILCS 5/12-1001(b); 735 ILCS 5/12-1001.1 (eff. 1-1-26)

Money Benefits

Money benefits include things like pensions, retirement accounts, wages, and public assistance programs.

Pension Exemption

Illinois law protects many types of pensions and retirement accounts. If you’ve worked in public service —  as a police officer, firefighter, teacher, judge, or public employee — your pension is generally fully exempt. This also applies to employees of the state, counties, municipalities, park districts, universities, and libraries.

💰 You can also use this exemption to protect certain retirement savings, including:

• 401(k) and 403(b) plans

• IRAs (Individual Retirement Accounts)

• ERISA-qualified retirement plans

• Public employee retirement systems

👍 A good rule of thumb: If your retirement account or pension is tax-exempt under federal law, it’s usually fully protected under Illinois law as well.

📘 Sources: 735-5/12-1006 and 40 ILCS 5/

Wage Exemption

Illinois law lets you protect part of your wages from being taken by creditors. You can keep the greater of these two amounts:

• 85% of your gross wages (your total pay before taxes and deductions)

• An amount equal to 45 times the federal minimum hourly wage per week

As of now, the federal minimum wage is $7.25 per hour, so 45 times that equals $326.25 per week. If 85% of your weekly pay is more than that, you can protect the higher amount.

This exemption helps ensure you still have enough income to cover basic living expenses.

📘 Source: 735 ILCS 5/12-803

Public Benefit Exemptions

The following public benefits are fully exempt in Illinois, meaning they can’t be taken by creditors or during bankruptcy:

• Aid to the aged, blind, or disabled

• Public assistance, including earned income tax credits (EITC) and child tax credits (Note: This exemption applies to future payments, not to money you've already received and deposited.)

• Social Security benefits

• Veterans benefits

• Unemployment compensation

• Workers’ compensation

• Workers’ occupational disease compensation

• Crime victims’ compensation

• Restitution payments related to the forced relocation and internment of Japanese Americans and Aleutian Islanders during World War II

📘 Sources: 735 ILCS 5/12-1001(g)(h); 820 ILCS 305/21; 820 ILCS 310/21; Public Law 100-383 (Civil Liberties Act of 1988)

Insurance

🛡️ You may be able to protect certain insurance benefits in bankruptcy. These include:

• Health and disability benefits

• Fraternal benefit society benefits

• Life insurance proceeds that are paid to your spouse, child, or other dependent

• Homeowners’ insurance proceeds from the destruction of your home, protected up to $15,000, increasing to $50,000 starting Jan. 1, 2026

📘 Sources: 735 ILCS 5/12-1001(f) & (g)(3); 215 ILCS 5/299.1a, 215 ILCSV 5/238(a), 735 ILCS 5/12-907

Alimony and Child Support 

If you receive alimony (also called spousal support) or child support, that money is protected in bankruptcy as long as it’s reasonably necessary for your support or the support of your dependents.

Illinois law treats these payments as essential for everyday living, so they’re considered exempt from collection in most cases.

📘 Source: 735 ILCS 5/12-1001(g)(4)

Need Help Filing Chapter 7 Bankruptcy in Illinois? 

✨ If you’re feeling overwhelmed by the bankruptcy process and can’t afford to hire a lawyer, Upsolve may be able to help. Our free tool walks you through the process step by step — and you can get started today.

If you’re worried your property may not be protected in a Chapter 7 case, it’s a good idea to schedule a free consultation with a bankruptcy attorney. They can help you understand how the law applies to your specific situation.