Can I Use the Federal Bankruptcy Exemptions?

Bankruptcy exemptions are extremely important in any consumer bankruptcy proceeding. In a Chapter 7 bankruptcy case, which is a liquidation bankruptcy, it is important to know that bankruptcy exemptions allow a debtor to keep various assets so that they are not liquidated. To be clear, any assets that are exempt do not need to be sold, and the debtor can keep them while still receiving a discharge of eligible debts. In a Chapter 13 bankruptcy case or another type of reorganization bankruptcy, exemptions are used to determine the amount of debt that the individual debtor must repay over the course of the repayment plan.

If you are considering filing for bankruptcy in Illinois, especially if you are planning to file for Chapter 7 bankruptcy, you may have started looking into bankruptcy exemptions to determine how they are likely to apply to your case. Yet it can be confusing to find that there are both federal bankruptcy exemptions and state bankruptcy exemptions. You may be wondering: can I use the federal bankruptcy exemptions or the Illinois bankruptcy exemptions, or can I choose between the two? In short, debtors in Illinois are required to use the state’s bankruptcy exemptions, but our Oak Park bankruptcy lawyers can provide you with more information.

Only Certain States Permit Debtors to Select the Federal Bankruptcy Exemptions

State law determines whether a debtor is able to choose between applying federal bankruptcy exemptions or state bankruptcy exemptions. The federal bankruptcy exemptions are only available to debtors in the District of Columbia and in fewer than half of U.S. states. Those states that permit debtors to choose between the federal bankruptcy exemptions and the state bankruptcy exemptions include:
  • Alaska;
  • Arkansas;
  • Connecticut;
  • District of Columbia (Washington, D.C.);
  • Hawaii;
  • Kentucky;
  • Massachusetts;
  • Michigan;
  • Minnesota;
  • New Hampshire;
  • New Jersey;
  • New Mexico;
  • New York;
  • Oregon;
  • Pennsylvania;
  • Rhode Island;
  • Texas;
  • Vermont;
  • Washington State; and
  • Wisconsin.
As you can see, Illinois is not on that list. Accordingly, if you file for bankruptcy in Illinois, you will need to use the state exemptions listed under Illinois law. It is important to note that even if you do live in and file for bankruptcy in a state that permits you to choose between the federal and the state exemptions, you cannot mix and match between the two; you must choose either the federal exemptions in whole or the state exemptions in whole. For example, you cannot use one federal exemption and one state exemption.

What are the Illinois Bankruptcy Exemptions?

If you cannot use the federal bankruptcy exemptions in Illinois, what are the state exemptions available to you? There is a range of exemptions that you should discuss with an attorney, and the following is a sample of what is available to you:
  • Homestead exemption of up to $15,000 in a primary residence;
  • Motor vehicle exemption of up to $2,400 in an automobile;
  • Wildcard exemption of up to $4,000;
  • Exemption of alimony and support payments;
  • Exemption of pensions and most retirement benefits;
  • Up to 85% of your gross wages; and
  • Exemption of benefits, such as workers’ compensation benefits or veteran’s benefits.
Contact an Oak Park Bankruptcy Attorney for Assistance

If you are thinking about bankruptcy and have questions or need advice, you should reach out to one of the experienced Oak Park bankruptcy attorneys at our firm. Contact the Emerson Law Firm to learn more.


See Related Blog Posts:
Inflation and Consumer Bankruptcy
Converted, Closed, and Dismissed Bankruptcy Cases: What is the Difference?

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