Bankruptcy Issues for Illinois Residents

The traditional form of bankruptcy is Chapter 7, under which the court liquidates most of your assets and uses the proceeds to pay off as much of your debt as possible. Anything not paid is discharged or erased. Under Chapter 13, you develop a plan to pay off priority and secured debts, plus as much unsecured debt as possible, over a specific amount of time. Federal law governs bankruptcy procedures, but some specifics can vary by state.

You Must File Bankruptcy in the Appropriate Illinois District

Illinois' bankruptcy court is divided into three districts: Northern, Central and Southern. The main bankruptcy courts are in Chicago for the Northern District, Springfield for the Central District, and East St. Louis for the Southern District. Each district also has additional divisional offices. You must file in the district in which you live.

Who is Eligible to File Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is available to debtors whose average monthly income for the previous six months is less than the state's median income. In Illinois, the median income is $3,915 monthly, or $46,983 annually, for a single-person household as of 2012. People with higher incomes may file for Chapter 7 bankruptcy only if they pass a stringent means test.

Chapter 13 Plan Duration

The time you will spend in Chapter 13 bankruptcy depends on how your monthly income compares to the state median. If you make less than the median income, your plan should be not more than 36 months. The bankruptcy court may extend it up to 60 months for good cause. If your monthly income matches or exceeds Illinois' median, your plan must generally last 60 months. If you can pay all unsecured debt in less time, your plan may be shorter.

How Much Property Can I Keep in Illinois?

When you file for bankruptcy protection, you're permitted to keep some of your personal property. These are called exemptions. Although the federal government has a list of exemptions, Illinois has opted to set its own, which you must follow. If you've lived in Illinois for less than two years, you may need to use the exemptions from your previous state of residence.

Illinois allows you to keep personal property up to a certain value, including health aids, a bible, clothing and prepaid tuition trust funds. Certain pensions, public benefits and property of a business partnership are also exempt. Illinois exempts up to $15,000 of equity interest (the amount you actually own) in owner-occupied real estate, and $2,400 of equity interest in motor vehicles.

Talk With a Bankruptcy Lawyer

Bankruptcy laws in Illinois can be complicated. For more detailed, specific information, please contact an Illinois bankruptcy lawyer.

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