In an effort to help people get out from under debt that cannot be paid in a reasonable amount of time, every state has bankruptcy laws for debtors. Like most other states, Illinois allows for chapter 7 bankruptcy, in order to get a fresh start, or Chapter 13 bankruptcy to restructure present debts and help the debtor be caught up, while retaining personal property. However, the benefits of bankruptcy must be weighed against the risks of losing buying power. Any changes in filing or conversion of bankruptcy must be approved by the court.
Illinois Bankruptcy Topics
- Personal Bankruptcy Options
- Keep Your Home: Bankruptcy and Foreclosure
- Illinois Exemptions to Bankruptcy Liquidation
- Options for Filing Bankruptcy
- Local Bankruptcy Courts and Trustees
In accordance with the bankruptcy code, Illinois residents may file under chapter 7 straight bankruptcy or chapter 13 restructuring bankruptcy.
- Chapter 7 Bankruptcy - Chapter 7 bankruptcy is also known as the ‘fresh start’ bankruptcy. In chapter 7 bankruptcy, all applicable assets are liquidated to pay creditors. If there is no equity in the home, the lender may just abandon it to the debtor, as long as the house payments are continually made on time. It might be possible to keep an older car. The majority of debts are forgiven, and the slate is wiped clean. However, the income limits for the single wage earner is $47,355, a 2-person household is $60,049, and a 3-person family is $68,730.
- Chapter 13 Bankruptcy - Many people are really struggling financially. However, they do not want to liquidate their assets. In addition, they have strong convictions that they have an obligation to pay back creditors. Unfortunately, a lower-paying job, unexpected medical bills, or some other financial challenge has put them in a tough spot. But, in order to file for chapter 13, the debtor must have a stable job with some income left over after paying for the basic necessities like food and shelter. The secured debt must not exceed $1,010,650 and the unsecured debt can be no more than $336,900.
Filing bankruptcy in the midst of foreclosure may only delay the inevitable. If the process is already well under way, the lien holder can ask the court to release the property, so it can be resold. However, it may give the debtor time to file chapter 13, in an effort to keep the property. However, if the plan is to restructure debts, it is a good idea to talk with a bankruptcy lawyer before ever receiving a notice of foreclosure, to discuss ways to protect the assets and still get debt relief.
In Illinois, a list of assets and benefits that the court cannot touch in order to pay off creditors exists. The following table is a partial list of what every debtor can keep:
Type of Asset(s)
Details on Applicable Exemption(s)
Real estate including: farm, lot with building, mobile home, condominium, etc. up to $7500-proceeds of any sale are exempt for a year-also if a spouse dies or deserts up to the same amount. If married, the amount doubles
Bible, photos, schoolbooks, clothing, health aids, old car worth no more than $1200, personal injury compensation up to $7500, proceeds of exempt property, title of boat over 12 feet, wrong death needed for living expenses,
Fraternal and society benefits, life insurance benefits for dependents, life insurance benefits that are under contract to not be paid to creditors,
Partnership business property, alimony and child support
Civil service and county employees, firefighters pension for disabled firefighters, their widows and children, qualifying ERISA, general assembly members, prison employees, judges, public employees, state employees, etc.
Government aid, compensation for crime victims, Social Security, Restitution for WWII relocation, unemployment, veteran’s benefits, workmen’s comp, occupational and disease compensation
Tools of Trade
Books and tools up to $750
- Use a Bankruptcy Lawyer - To avoid any potential problems in bankruptcy court, it is strongly advised to hire the services of a professional lawyer. For example, a debtor can be charged with fraud, even if lack of necessary information is accidental. Bankruptcy requires much paperwork, and there are many legal issues that a nonprofessional would not consider. Having representation during the process can prevent a lot of trouble down the road.
- Use a Filing Service - In order to save money, debtors may elect to use a filing service. However, the choice is at the debtor’s risk. The service is only responsible for filing the paperwork. If an important document is neglected, the debtor is responsible. During proceedings, the service cannot answer questions in court or represent the debtor in any way.
- File “Pro Se” - In most cases, it is personal folly for the debtor to represent him/herself in bankruptcy court. So much paperwork must be filed. Many questions need to be answered. Without the proper legal representation, the outcome of the case can hurt the debtor, unless he/she has extensive knowledge of bankruptcy law.
Illinois Central District Court
151 Paul Findley Federal Bldg and
United States Courthouse
600 East Monroe Street
Springfield, IL 62701
Illinois South District Court
104 Melvin Price Federal Bldg and
United States Courthouse
750 Missouri Avenue
East St. Louis, IL 62201