There is a huge misconception out there that basically states that in order to file for bankruptcy relief you have to be penniless. This misconception stems from the fact that most people are not aware of Illinois personal property and real property exemption laws. The exemption laws are actually independent laws separate from the United States Bankruptcy Code. If you are being sued in Illinois and a creditor has a judgment against you, you have these property exemptions which protect you from losing everything to that creditor. If you exceed the limits of the exemptions, then the creditor can attach or seize your non-exempt property. Most people have no idea what property is protected and to what extent.
When you file a bankruptcy case in Illinois, you have definitely filed a federal case. However, within that federal case you are allowed to protect or exempt specific property pursuant to the Illinois state exemption laws. Most people who file chapter 7 bankruptcy keep all of their property. They do so by declaring particular items of property exempt under the Illinois law. For example:
A person can protect up to $15,000 worth of equity in their Homestead. This is found under 735 ILCS 5/12 – 901. If a married couple is filing jointly, then they can combine their Homestead exemption and protect up to $30,000 worth of equity.
A person can protect up to $2400 worth of equity in one motor vehicle. This is found under 735 ILCS 5/12 – 1001(C). If a married couple is filing jointly, then they can combine their motor vehicle exemption and protect up to $4800 worth of equity in one motor vehicle.
There is also a wildcard exemption which allows a person to protect up to $4000 worth of miscellaneous personal property. This is found under 735 ILCS 5/12 – 1001(b). If a married couple files jointly, then they can combine their wildcard exemption and protect up to $8000 worth of personal property.
Examples of the most common Illinois exemptions:
| Homestead | 735 ILCS 5/12 – 901 | $15,000.00 |
| Motor Vehicle | 735 ILCS 5/12 – 1001(C) | $ 2,400.00 |
| Wildcard | 735 ILCS 5/12 – 1001(b) | $ 4,000.00 |
As you can see, you can file for bankruptcy and be very far from penniless. You can have significant equity in a home, moderate equity in a vehicle and plenty of personal property and still take advantage of the federal bankruptcy laws in order to get a fresh start. So before you start thinking that there is no way that you can file because you have a house or because you have a car or because you have a savings account, think again. Talk to an experienced bankruptcy attorney who knows the laws in your local area. If that attorney determines that some of your property may be unprotectable in a chapter 7, you may qualify then for chapter 13 bankruptcy. Under chapter 13 bankruptcy, you keep all of your property regardless of the equity therein. You simply have to pay back to your creditors over a three to five-year period at least what they would’ve gotten if you had liquidated under chapter 7 bankruptcy. This is known as the Chapter 7 bankruptcy liquidation test.
Hopefully, you are now aware that you are eligible to file a chapter 7 bankruptcy despite the fact that you have some property. By knowing the Illinois exemption laws inside and out, you will be in a greater position to understand how bankruptcy can provide you the relief that you need and yet keep the property that you have.
