When an individual or a business in Illinois has overwhelming debts they cannot repay, they may consider filing for bankruptcy. The bankruptcy process allows the debtor to not only pay off their debts, but also gives them a fresh start.
Determining which type of bankruptcy is right for a specific debtor depends on a variety of factors, including income, debts, assets and financial goals. Debtors facing imminent threat of foreclosure, repossession, or wage garnishment may obtain debt relief through bankruptcy.
What Type of Bankruptcy Is Right for You?
In Illinois, the two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as "liquidation" bankruptcy, is available to businesses and individuals.
Under Chapter 7, a bankruptcy trustee sells the debtor's nonexempt assets to pay off creditors. For those who have few assets and cannot pay off their debts, this type of bankruptcy is popular because it is quick and straightforward.
Chapter 13 bankruptcy, also known as "reorganization" bankruptcy, is available only to individuals. In a Chapter 13 bankruptcy case, the debtor creates a repayment plan that allows them to pay off some or all of their debts over a three- to five-year period. This type of bankruptcy is typically used by those with a regular income source who need more time to pay off their debts.
What Are Bankruptcy Exemptions?
Bankruptcy exemptions are certain assets that cannot be seized by creditors or a bankruptcy trustee in order to pay off debts. A debtor can choose to use either the Illinois bankruptcy exemptions or the federal bankruptcy exemptions when filing. They cannot use both.
Some examples of bankruptcy exemptions that are available under Illinois law are:
- Homestead exemption: Protects the equity in a debtor’s primary residence up to a specific amount.
- Motor vehicle exemption: Protects the equity in one motor vehicle up to a specific amount.
- Personal property exemption: Protects certain types of personal property, such as furnishings and appliances, up to a specific amount.
- Pension and retirement exemptions: Protect benefits like 401(k)s and IRAs.
- Wildcard exemption: Protects any property not covered by other exemptions.
Illinois Bankruptcy Exemption Amounts
These are Illinois bankruptcy exemption amounts in 2023. They are due to increase in 2025, according to the rate of inflation.
Type of Exemption
Amount of Exemption
Type of Exemption
Amount of Exemption
Up to $15,000. The homestead exemption includes condominiums, cooperatives, farms, lots with buildings, and mobile homes. This exemption also protects proceeds from a homestead’s sale for one year.
Tools of the Trade
$1,500 in tools, including professional books.
National Guard uniforms and guns are fully exempt.
$4000. Covers personal property that isn't covered by other exemptions.
Fully exempt, with the exception of child support claims.
Alimony and Support
An amount deemed reasonably necessary for support.
85 percent of the debtor's gross earnings or 45 times the U.S. minimum wage per hour a week, whichever is more.
Cemeteries and Burials
All needed cemetery pre-sales and care funds are fully exempt.
Life insurance is exempt to the extent needed for support; health, disability benefits are fully exempt.
A partner's interest in a specific property is exempt via the Uniform Partnership Act.
Fully exempt if the debtor has yet to receive the funds.
Pension and Retirement Benefits
Pensions for government employees are exempt; retirement accounts, such as 401Ks and IRAs, are also exempt.
Up to $2,400 in one motor vehicle.
Some exemptions include clothes; books; prescribed health aids; certificate of title to watercraft more than 12 feet in length; tuition trust funds (pre-paid); and Illinois College Savings Pool accounts.
Qualifying for Chapter 7 Bankruptcy in Illinois
To qualify for bankruptcy in Illinois, debtors must meet certain eligibility requirements set out in the U.S. Bankruptcy Code.
When filing Chapter 7 bankruptcy, the debtor must pass a means test, comparing their income to the median income for the average Illinois household. If the debtor's income is below the median, they will be eligible for Chapter 7 bankruptcy.
If it is above the median, the debtor may still be eligible for Chapter 7 bankruptcy, but must further demonstrate that they have insufficient income to pay off their debt. If they can't, they can file for Chapter 13 bankruptcy instead.
Qualifying for Chapter 13 Bankruptcy in Illinois
To qualify for Chapter 13 bankruptcy, the debtor must have a regular source of income, and their debt must fall within certain limits.
As of 2022, the maximum amount of unsecured debt, such as credit card debt, needed to qualify for Chapter 13 bankruptcy is $465,275, and the maximum amount of secured debt, such as a mortgage or a car loan, is $1,395,875.
How to Find a Bankruptcy Lawyer in Illinois
Debtors considering filing for bankruptcy in Illinois should work with an experienced bankruptcy attorney to ensure compliance the necessary steps. To find a bankruptcy lawyer in Illinois, a debtor can:
- Get referrals from trusted family members, friends and coworkers.
- Search online directories like the American Bar Association's attorney referral service.
- Contact the Illinois State Bar Association via its online search function for bankruptcy attorneys in the area. Local county bar offices also have their own legal referral services.
Once the debtor has compiled a list of potential bankruptcy attorneys, they should schedule consultations with each to ascertain their experience and expertise. Attorney fees can vary, so it is important for the debtor to consider their budget when hiring a bankruptcy attorney.
How to File for Bankruptcy in Illinois
To file bankruptcy in Illinois, the debtor must follow specific steps, which vary depending on the type of bankruptcy they file and the circumstance of their case:
- First determine which type of bankruptcy is right for their specific situation by consulting with a bankruptcy attorney.
- Gather the necessary supporting documents for filing bankruptcy, including but not limited to, income tax returns, pay stubs and a list of debts and assets.
- Complete the required credit counseling course.
- Prepare and file the bankruptcy petition, including filling out bankruptcy forms and filing them with the Illinois bankruptcy court.
- After filing, attend a meeting of creditors where the bankruptcy trustee and creditors will question them about their debts and assets.
- Depending on the type of bankruptcy the debtor files, they may be required to take additional steps, such as creating a repayment plan.
Illinois Bankruptcy Court Locations
The U.S. bankruptcy courts are divided among three Illinois districts. Their locations are:
Central District of Illinois
Bloomington, Danville, Decatur, Galesburg, Kankakee, Paris, Peoria, Quincy, Rock Island, Springfield
Adams, Brown, Bureau, Cass, Champaign, Christian, Coles, De Witt, Douglas, Edgar, Ford, Fulton, Greene, Hancock, Henderson, Henry, Iroquois, Kankakee, Knox, Livingston, Logan, Macon, Macoupin, Marshall, Mason, McDonough, Mclean, Menard, Mercer, Montgomery, Morgan, Moultrie, Peoria, Piatt, Pike, Putnam, Rock Island, Sangamon, Schuyler, Scott, Shelby, Stark, Tazewell, Vermilion, Warren, Woodford
Northern District of Illinois
Chicago, Joliet, North Aurora, Rockford, Waukegan, Wheaton
Boone, Carroll, Cook, Dekalb, Du Page, Grundy, Jo Daviess, Kane, Kendall, Lake, La Salle, Lee, McHenry, Ogle, Stephenson, Whiteside, Will, Winnebago
Southern District of Illinois
Alton, Benton, East St. Louis, Effingham, Mt. Vernon
Alexander, Bond, Calhoun, Clark, Clay, Clinton, Crawford, Cumberland, Edwards, Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson, Jasper, Jefferson, Jersey, Johnson, Lawrence, Madison, Marion, Massac, Monroe, Perry, Pope, Pulaski, Randolph, Richland, St. Claire, Saline, Union, Wabash, Washington, Wayne, White, Williamson
FAQs About Bankruptcy in Illinois
How much debt do you have to have to file bankruptcy in Illinois?
For most types of bankruptcy, there’s no specific debt threshold that you have to meet. However, Chapter 13 bankruptcy debtors must have unsecured debts less than $465,275, and secured debts less than $1,395,875.
How long does it take to file bankruptcy in Illinois?
The time it takes to file for bankruptcy in Illinois depends upon the specific circumstances of the case and the type of bankruptcy.
A bankruptcy filing typically involves several steps, including completion of the necessary paperwork, attending a credit counseling course, and appearing at a meeting of creditors. All of this can take several months to complete.
Where are the bankruptcy courts in Illinois?
In Illinois, bankruptcy cases are filed at the state’s bankruptcy courts. There are three bankruptcy court locations in Illinois: the Northern District of Illinois, the Central District of Illinois, and the Southern District of Illinois.
How long does bankruptcy in Illinois last?
The length of time that bankruptcy proceedings last in Illinois depends on the specific type of bankruptcy. Chapter 7 bankruptcy, known as "liquidation" bankruptcy, is generally the quickest form. Most Chapter 7 cases are completed within a few months.
Chapter 13 bankruptcy, known as "reorganization" bankruptcy, involves the creation of a repayment plan that allows the debtor to pay off some or all of their debts over three to five years.
How much does filing for bankruptcy cost in Illinois?
The cost of filing for bankruptcy in Illinois depends on several factors, including the type of bankruptcy, the complexity of the case, and the fees charged by attorneys and the bankruptcy court.
Several court fees are associated with the bankruptcy process, including a filing fee and a fee for the mandatory credit counseling course. In 2023, the filing fee for a Chapter 7 bankruptcy case is $338, and the fee for a Chapter 13 case is $313.
There may also be additional fees for certain services, such as obtaining copies of documents or requesting that the court issue a certificate of discharge.
What are the benefits of filing bankruptcy in Illinois?
There are several benefits to filing for bankruptcy in Illinois, including relief from creditor harassment, debt discharge, protection of assets and an automatic stay prohibiting creditors from taking any collection actions while the bankruptcy is in progress.
- NOLO: Illinois Bankruptcy Exemptions
- US Courts: Chapter 7 - Bankruptcy Basics
- US Court: Chapter 13 - Bankruptcy Basics
- Find Law: Exempt vs. Non-exempt Property Under Chapter 7
- Find Law: Illinois Homestead Laws
- ILGA.gov: (20 ILCS 1805/10) (from Ch. 129, par. 220.10)
- ILGA.Gov: (735 ILCS 5/12-1001) (from Ch. 110, par. 12-1001)
- ILGA.Gov: Business Transactions (815 ILCS 205/) Interest Act
- ILGA.Gov: (735 ILCS 5/12-1006) (from Ch. 110, par. 12-1006)
- ILGA.Gov: (735 ILCS 5/12-803) (from Ch. 110, par. 12-803)
- ILGA.Gov: (820 ILCS 305/21) (from Ch. 48, par. 138.21)
- US DOJ: MEANS TESTING
- ISBA: Illinois Lawyer Finder
- Illinois Bankruptcy Law: Illinois Bankruptcy Attorneys
- US Courts.Gov: Bankruptcy Forms
- Illinois Bankruptcy Law: Illinois Bankruptcy Court Directory
- US Bankruptcy Court: Central District of Illinois
- US Bankruptcy Court: Northern District of Illinois
- US Bankruptcy Court Southern District of Illinois
- U. S. Bankruptcy Court Northern District of Illinois: Schedule of Fees 28 U.S.C. Section 1930
- AmericanBar.Org: Lawyer Referral Directory
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.