Property you can keep if you file a Chapter 7 bankruptcy
Under Illinois law, each individual who files for Chapter 7 bankruptcy is entitled to keep certain property which is considered "exempt."
For some types of property - such as family photos, health aids, worker's compensation benefits, retirement plans, IRAs and life insurance - the value and amount that an individual can claim as exempt is unlimited. In other cases, the equity an individual can claim as exempt is limited by a fixed dollar amount.
Common examples of such dollar amount limitations for an individual are:
- Your personal residence (equity of $15,000)
- Personal injury cases ($15,000)
- Motor vehicle (equity of $2,400 for each individual owner)
- Tools or books used in your occupation (equity of $1,500).
In addition, Illinois law gives each individual the right to exempt $4,000 in equity in any other personal property, including cash or money in the bank. If a husband and a wife file a joint bankruptcy petition, each spouse is entitled to claim these exemptions.
A discharge in Chapter 7 will not affect some debts such as alimony, child support, certain taxes, fines, certain debts arising from education loans and debts which the debtor failed to disclose to the bankruptcy court.
A specific creditor may request that the Bankruptcy Court exclude it from the debtor's discharge debts resulting from loans received by giving a lender a false financial statement as well as debts arising from fraud, embezzlement, drunk driving or certain other willful or malicious acts. If the bankruptcy judge rules in that creditor's favor, the debt to that creditor will not be discharged in a bankruptcy.
Note: This information was prepared as a public service by the Illinois State Bar Association and is a joint project with the Illinois Press Association. Its purpose is to inform citizens of their legal rights and obligations.
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If you have questions about the application of the law in a particular case, consult your lawyer. The law is constantly changing. Information on this site or any site to which we link does not constitute legal advice.