Illinois Legislature Increases Key Debtor Exemptions Starting on January 1, 2026

On August 19, 2025, the Illinois General Assembly enacted Public Act 1738 (SB 1738), amending several provisions of the Illinois Code of Civil Procedure (735 ILCS 5) to raise debtor exemption limits effective January 1, 2026. The new law provides expanded protection for Illinois residents against judgment enforcement and creditor collection, marking the most significant increase to the state’s exemption statutes in over a decade.

Under the amended 735 ILCS 5/12-901, the homestead exemption, which shields the equity in an individual’s primary residence, will increase from $15,000 to $50,000 per person. For property jointly owned by two or more individuals, such as married couples, the exemption rises from $30,000 to $100,000. The General Assembly cited rising housing values and cost-of-living pressures as the basis for the increase, noting that the expanded protection better reflects the financial realities faced by homeowners. This change may also help judgment defendants retain their homes in enforcement proceedings or bankruptcy filings by preserving a larger share of their equity from forced sale or levy.

In addition to the homestead increase, personal property exemptions under 735 ILCS 5/12-1001 have also been adjusted. The automobile exemption rises from $2,400 to $3,600 per individual, allowing debtors to protect a greater portion of their vehicle’s value. This is an especially important update for working individuals who rely on personal transportation. Likewise, the tools-of-the-trade exemption increases from $1,500 to $2,250, expanding the amount of equipment, books, and instruments of a debtor’s occupation that can be protected from creditors. Additionally, the wildcard exemption remains at $4,000 for personal property, which debtors may allocate to cash, bank accounts, or other personal assets. This flexibility allows individuals to protect modest savings or non-traditional assets.

Public Act 1738 includes additional procedural updates relevant to judgment enforcement and small claims practice. It modifies provisions related to the revival of consumer judgments entered before January 1, 2020, and amends sections of the Clerks of Courts Act to prohibit certain filing fees for small claims defendants. These changes collectively aim to modernize Illinois’s judgment enforcement framework and enhance fairness for individual debtors.

The new exemption thresholds under Public Act 1738 are expected to benefit homeowners, consumers, and small business owners across Illinois by providing a greater financial cushion during debt collection or bankruptcy proceedings. Attorneys representing debtors, creditors, or trustees should review the amended statutes and update client advisories and collection strategies to ensure compliance with the new law once it takes effect on January 1, 2026.

If you would like more details, please do not hesitate to call our office. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.