The Illinois Homestead Exemption

If you're considering filing for bankruptcy in Illinois, the Illinois homestead exemption will help you protect the equity in your home. This article explains how much Illinois's homestead exemption is and how to apply it in your bankruptcy case when you want to keep your house.

How Much Is the Homestead Exemption in an Illinois Bankruptcy?

In Illinois, you'll use Illinois's state exemptions because the federal bankruptcy exemptions aren't available (some states allow residents to choose between the two sets). You'll find Idaho's homestead exemption amount listed below.

What Property Can You Protect With the Illinois Homestead Exemption?

Under the Illinois exemption system, homeowners can exempt up to $22,750 of equity in a home or other property covered by the homestead exemption. Married couples filing a joint bankruptcy can double the homestead exemption amount if both filing spouses own the property.

The homestead exemption applies to real and personal property you use as a residence, including your home, condominium, mobile home, or co-op. The homestead exemption also applies to sale proceeds from the sale of any real or personal property for up to one year from the date you sell the property and it's automatic. You don't have to file a homestead declaration to claim the homestead exemption in bankruptcy.

Example. Suppose your house is worth $100,000. You have a $90,000 mortgage on the property, leaving $10,000 of home equity. Your equity will be fully exempt using the Illinois homestead exemption if you file for bankruptcy. Your creditors won't be able to touch your equity, and you will keep your home (as long as you can continue making mortgage payments and paying taxes).

Real property held as tenancy by the entirety. A tenancy by the entirety is often called a "super exemption," although it's not an exemption. If you and your spouse hold your home as a tenancy in the entirety and only one spouse files for bankruptcy, you could have greater protection against creditors because, in that situation, creditors are usually unable to take it to pay debts.

However, there are limits to the protection. For instance, a tenancy by the entirety won't protect the residence against some tax debts. Because this is one of the trickier protections, you'll want to consult a lawyer about your situation.

Other Requirements for Keeping a Home in Bankruptcy

If you can't protect all of your home equity, you might not be able to keep your home. Typically, the Chapter 7 trustee appointed to your case would sell the house, return the exemption amount to you, pay off the mortgage, and pay creditors with the amount remaining after deducting the trustee's fee.

In Chapter 13, the trustee doesn't sell property, so you could keep it. However, that doesn't mean Chapter 13 filers get a break regarding how much equity they can retain. Instead, you'd need to pay creditors the value of the nonexempt equity through the Chapter 13 plan.

But that isn't all. Keeping your home requires being current on the mortgage when filing for Chapter 7. Otherwise, you could lose it to the lender through foreclosure, possibly even during the Chapter 7 case. If you're behind on payments when filing for Chapter 13, you have an option not available in Chapter 7. You can catch up on the payments over time through the plan.

Learn about other requirements you must meet in Your Home in Chapter 7 and Your Home in Chapter 13. Also, find out why filing for Chapter 13 is better than Chapter 7 when you're behind on payments and don't want to lose your house.

Claiming the Homestead Exemption

When completing your bankruptcy forms, you'll do the following:

• disclose your home on Schedule A/B: Property
• list your home and the homestead exemption law on Schedule C: The Property You Claim as Exempt, and
• if filing for Chapter 7, explain whether you plan to keep or surrender the home on Statement of Intention for Individuals Filing Under Chapter 7.

Because your home is likely your most valuable asset, consider consulting with a bankruptcy lawyer to ensure you can protect it in bankruptcy.

Where to Find the Homestead Exemption Statute

Illinois's homestead exemption is in the Illinois state statutes at 735 Ill. Comp. Stat. 5/12-901 on the Illinois General Assembly website. The statute portion of the Illinois General Assembly website might not post the most current exemption amounts. If a session of the General Assembly has ended and the amounts were updated, the current amounts will be posted in the General Assembly Public Acts area.

You can learn how to find state statutes in Laws and Legal Research. However, consulting a local bankruptcy lawyer is the best way to ensure you protect all property.

When You Can Use Bankruptcy Exemptions

You can file for bankruptcy in Illinois after living there for over 180 days. However, you must live in Illinois for at least 730 days before filing to use the current state's exemptions. Otherwise, you'd use the previous state's exemptions.

If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for the majority of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)

Learn more about filing for bankruptcy after moving to a new state, the current amount of the federal cap, and other essential exceptions to homestead exemptions. Also, spouses can double some exemption amounts if both parties own the property, but not all of them. Learn about other filing considerations for spouses.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You can find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. Information needed to complete the official downloadable bankruptcy forms is on the Department of Justice U.S. Trustee Program website.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.