{"id":286847,"date":"2021-04-22T06:35:51","date_gmt":"2021-04-22T11:35:51","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/bankruptcy\/bankruptcy-laws-by-state\/illinois-bankruptcy-exemptions-and-law.html"},"modified":"2026-09-08T11:41:54","modified_gmt":"2026-09-08T16:41:54","slug":"illinois-bankruptcy-exemptions-and-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/state\/illinois-law\/illinois-bankruptcy-exemptions-and-law.html","title":{"rendered":"Illinois Bankruptcy Exemptions and Law"},"content":{"rendered":"\n
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Illinois Bankruptcy Exemptions and Law<\/h1>\n\n
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\n By Balrina Ahluwalia, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Illinois<\/span> bankruptcy<\/span> law<\/span> helps state residents eliminate unmanageable debt while protecting personal assets through mandatory state exemptions. Filers typically choose between Chapter 7 liquidation<\/span> and Chapter 13 repayment plans<\/span> depending on their income and eligibility<\/span>. Upon filing, an automatic stay<\/span> immediately halts most collection actions, wage garnishments<\/span>, and foreclosures<\/span> to grant individuals a fresh financial start.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n

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For Illinoisans struggling with mounting debt, it\u2019s important to understand the truths and myths about filing for bankruptcy. Filing bankruptcy<\/span><\/a> is widely considered a responsible way to address debt that\u2019s become unmanageable. It doesn\u2019t stay on your credit report<\/span> forever and allows you to keep much of your property. In addition, it can provide you with a fresh start<\/span> free from significant debt. Still, it\u2019s not the right solution for everyone. Understanding Illinois<\/span> bankruptcy<\/span> rules can give you an idea of how it would impact you both now and in the future.<\/p>\n

This guide explains your consumer bankruptcy options in Illinois<\/span>. We cover how different types of debts are handled, as well as the property Illinois<\/span> law protects from creditors<\/a>. We\u2019ll also explore the rules surrounding this exempt property to give you an idea of what bankruptcy might look like for you.<\/p>\n

If you\u2019re facing increased pressure from creditors and collectors, doing nothing is often your worst option. Consider speaking with a solid bankruptcy attorney<\/span> who\u2019s licensed in Illinois<\/span><\/a>. Most offer free consultations and can help you understand your debt relief options. In some cases, that may include bankruptcy, but not all.<\/p>\n

Either way, this is a big decision. Make it an informed one and start regaining control of your future.<\/p>\n

For now, let\u2019s start with some bankruptcy basics<\/span><\/a>.<\/p>\n

Illinois<\/span> Bankruptcy<\/span> Law<\/span><\/h2>\n

Bankruptcies are handled in U.S. Bankruptcy Courts<\/span>. These are federal courts<\/span><\/a> governed by the U.S. Bankruptcy Code<\/span><\/a>. Federal law<\/span> also lets states set their own rules for what property and assets their residents can protect from creditors. This protected property is known as \u201cexempt property\u201d that can be used to help you get on with your life after you have exited bankruptcy.<\/p>\n

Some states allow you to choose between state and federal bankruptcy exemptions, but Illinois<\/span> isn\u2019t one of them. Illinois<\/span> bankruptcy<\/span> filers must use state law exemptions<\/a>. To better understand how state exemptions are used during the bankruptcy process, it helps to start with the two types of consumer bankruptcy.<\/p>\n

Chapter 7 Bankruptcy<\/span><\/h3>\n

Sometimes called a liquidation<\/span> bankruptcy, Chapter 7<\/a> requires you to turn over your nonexempt property<\/span> to a bankruptcy trustee, who will sell it and use the funds to repay your creditors. In return, you\u2019ll typically complete a Chapter 7 bankruptcy<\/span> free from nearly all your debt.<\/p>\n

State exemptions play a major role in Chapter 7<\/a> because they allow you to keep several types of property and assets. Chapter 7 cases<\/span> usually last three to four months and can stay on your credit report<\/span> for up to 10 years.<\/p>\n

Chapter 13 Bankruptcy<\/span><\/h3>\n

Also known as reorganization, Chapter 13<\/a> allows people with regular income<\/span> to reorganize most of their debt and pay it off over three to five years. Payments are made under a court-approved repayment plan<\/span> that usually eliminates some of your debt.<\/p>\n

State exemptions still apply in Chapter 13, but they determine the minimum amount unsecured creditors must be paid under the repayment plan<\/span>. Chapter 13 is popular with homeowners because it often lets them keep their home. Chapter 13 bankruptcies<\/span> can stay on your credit report<\/span> <\/a>for up to seven years.<\/p>\n

Both types of bankruptcy<\/span> include the automatic stay<\/span>, which is issued by the court when you file. The stay stops most debt collection<\/span> activity, including lawsuits, wage garnishment<\/span><\/a>, and foreclosures<\/span>.<\/p>\n

Secured vs. Unsecured Debt<\/h2>\n

During bankruptcy, your debts will usually be placed into one of two categories: secured and unsecured<\/a>. These debts are treated differently in bankruptcy and determine how much of your debt you can eliminate.<\/p>\n

Unsecured Debt<\/h3>\n

Debt is unsecured when a creditor has no right to repossess your property if you fail to pay. Credit card<\/span> debt, court judgments, and medical bills are some of the most common types of unsecured debt.<\/p>\n

Because unsecured debt involves no collateral, it\u2019s most likely to be eliminated during bankruptcy. Some unsecured debts, like child support<\/span> and most student loans<\/span>, can\u2019t be eliminated<\/a>.<\/p>\n

Secured Debt<\/span><\/h3>\n

A secured creditor has the right to repossess your property<\/a> if you don\u2019t pay what you owe. These are generally loans where you have signed a contract giving the lender the right to seek a lien on the collateral property if you don\u2019t pay.<\/p>\n

Since secured creditors retain their right to repossess the property in bankruptcy, you\u2019ll usually need to either give up the property or work out a repayment plan<\/span> with the creditor. Home mortgages<\/a> and car loans<\/span> are the most common types of secured debt<\/span>.<\/p>\n

What Happens to Your Debt in Chapter 7?<\/h2>\n

Chapter 7 is known as a \u201cliquidation<\/span>\u201d bankruptcy. When you file under Chapter 7, you can usually discharge most eligible unsecured debt<\/a>. For your secured debt<\/span>, you\u2019ll typically have three options:<\/p>\n