Filing Bankruptcy in Illinois: What You Need to Know

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Bankruptcy Exemptions Chapter 7 Bankruptcy Consumer Laws by State

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Chapter 7 Bankruptcy in IllinoisHome of the world’s first skyscraper, comedy showcase “Second City,” and the world’s largest public library, Chicago is a big city with a lot of attractions. It’s also the largest metropolitan area in Illinois, which also means an above average economic impact as the result of the coronavirus recession. Some experts think the coronavirus pandemic could set Chicago’s economy back decades.

Are you considering filing for bankruptcy in the Chicago area or perhaps in southern Illinois?

Don’t assume that the process will be little more than filling out some boilerplate forms. Many people mistakenly believe that filing for bankruptcy is the same throughout the country. While there is uniformity to the process based on the fact that the Bankruptcy Code is federal law, the process can vary greatly by state.

Filing for bankruptcy in Illinois is much different than filing in Texas. This is the case because state law has a big impact on the type and amount of property you can keep. Each state, as well as the federal government, has enacted exemption laws that designate certain types of property as off limits to creditors. Creditors cannot take your exempt property regardless of how much you owe them.

The same principle applies in bankruptcy. The bankruptcy trustee cannot take your exempt property. In fact, most people who file Chapter 7 bankruptcy are pleasantly surprised to learn that all of their property is exempt.

Filing Chapter 7 Bankruptcy in Illinois

Much has been written about the bankruptcy reforms of 2005. Suffice to say that most bankruptcy lawyers think the legislation, known as the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), is awful. One of their main complaints is the bankruptcy means test. The means test was put in place to make it more difficult for consumers to file Chapter 7 bankruptcy.

If your income is above the median for a household of similar size in your state, you must compare your expenses against the means test. If your disposable income is too high, there is a presumption that you must be in a Chapter 13 plan, where something is paid back to your unsecured creditors, rather than a Chapter 7 where nothing is paid back.

In Illinois, the average income for a single household is $50,765. If your income, measured over the last six months, is lower than $50,765, you’re presumptively entitled to file Chapter 7 bankruptcy. If your income is higher, you’ll need to work through the means test with an Illinois bankruptcy attorney to see whether you qualify. For a complete list of current income figures for households of all sizes, visit this site.

Illinois Bankruptcy Exemptions: What can I keep?

Illinois is what is known as an “opt-out” state, meaning federal exemptions are not available to Illinois debtors. If you’re filing bankruptcy in Illinois, you’ll need to use Illinois’ bankruptcy exemptions.

Be aware that a recent move can impact the laws that apply to your bankruptcy case. For example, if you’ve just moved to Chicago for a job, your previous state’s laws may apply. If you’ve lived in Illinois for more than two years, the Illinois state bankruptcy exemptions will apply to your case. Be prepared — they’re not overly generous.

Here are some of the most popular exemptions.

Illinois Bankruptcy Exemptions

The top 5 exemptions under Illinois state law.
Type of exemptionIllinois law
Homestead$15,000; $30,000 if filing with a spouse
Personal propertyClothing, books, medical aids, and more; $1,500 in tools of the trade; wildcard exemption allows for $4,000 in additional exemptions (does not count for wages)
Vehicle$2,400
WagesUp to 85% of gross earnings or 45 times the federal hourly minimum wage, whichever is greater
Pension/retirementTax-exempt retirement accounts and various pensions are exempt

Homestead

Illinois debtors are permitted to protect up to $15,000 of equity in a home or principal residence, including a farm, mobile home, lot with buildings, condo, or coop. Married couples filing jointly can double the exemption to $30,000. If you sell your home, the proceeds also are exempt for a year. 735 ILCS 5/12-901, 902, 906

Vehicle

In addition to the homestead exemption, debtors filing bankruptcy in Illinois can protect up to $2,400 of equity in a car. 735 ILCS 5/12-1001(c)

Personal Property

Any clothing, books, prescribed health aids, and family pictures are exempt. Tools of the trade up to $1,500 are exempt. Additionally, a certificate to a watercraft over 12 feet in length along with some college savings funds are exempt. A wildcard exemption also allows you to claim $4,000 in additional personal property exemptions, except for wages. 625 ILCS 45/3A-7; 735 ILCS 5/12-1001

Wages

Up to 85% of your gross earnings or 45 times the federal hourly minimum wage are exempt, whichever is greater. 735 ILCS 5/12-803; 740 ILCS 170/4

Retirement/pension

Tax-exempt retirement accounts are exempt, per federal rules, in addition to pensions for various employees.

How much will it cost to file bankruptcy in Illinois?

Just as every bankruptcy case is a little different, the cost of bankruptcy in each jurisdiction is different. Obviously, filing a Chapter 7 case in Chicago will be more expensive than filing in a more rural area of southern Illinois. As a general rule, Chapter 7 bankruptcy costs approximately $1,500. Regardless of jurisdiction, the bankruptcy court charges a $335 filing fee. Add to that the cost of a lawyer, which can range from $1,000 to $2,000.

If you end up filing for Chapter 13 bankruptcy, the costs are set by the court and are therefore more standardized: $3,000 is the national average to file Chapter 13, plus a filing fee of $310. If you’re concerned about being able to afford bankruptcy, don’t be. Most bankruptcy law firms will work with their clients to establish a payment schedule they can afford.

See also: Filing a Pro Se Bankruptcy is a Bad Idea

Illinois Bankruptcy Court Locations

There are three federal districts in Illinois: the Northern, Central, and Southern districts. Within each federal district are divisional courthouses that serve residents of multiple counties or cities, with typically a bankruptcy court in each federal divisional courthouse.

The division you file your case in will determine where your 341 meeting of creditors will be held.

Northern District of Illinois

Eastern Division: Cook, DuPage, Lake, Kane, Will, Grundy, LaSalle, and Kendall counties.

Western Division: Boone, Carroll, DeKalb, JoDaviess, Lee, McHenry, Ogle, Stephenson, Whiteside, and Winnebago counties.

Phone: (312) 408-7765

Central District of Illinois

Locations: Peoria, Springfield, Urbana.

Phone: (309) 671-7035, (217) 492-4551, (217) 974-7330

Southern District of Illinois

Locations: East St. Louis, Benton.

Phone: (618) 482-9400(618) 435-2200