Before filing for bankruptcy, you want to know whether you can keep valuable property—especially your home. If you qualify to use the Illinois homestead exemption, you'll be able to protect some equity in your house. In this article, we explain:
For more information, read How to File for Bankruptcy in Illinois. Not only does it explain the process, but you'll find helpful checklists and a link to an interactive bankruptcy quiz. Or, for a comprehensive bankruptcy guide, try What You Need to Know to File for Bankruptcy.
Under the Illinois exemption system, a homeowner can exempt up to $15,000 of equity in a home or other property covered by the homestead exemption.
For example, let's say your house is worth $100,000. You have a $90,000 mortgage on the property, leaving $10,000 of home equity. If you file bankruptcy, your equity will be fully exempt using the Illinois homestead exemption. Your creditors won't be able to touch your equity, and you will keep your home.
In Illinois, the homestead exemption is automatic. You don't have to file a homestead declaration to claim the homestead exemption in bankruptcy.
The homestead exemption applies to real and personal property that you use as a residence, including your home, condominium, mobile home, and 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. You must be a legal owner of record to claim the exemption—your name must be listed on the deed to the property.
In Illinois, married couples filing a joint bankruptcy can double the homestead exemption amount and protect up to $30,000 of home equity. Both spouses must have an ownership interest in the property to double the amount. You can learn about the advantages and disadvantages of joint bankruptcy filings in Filing Considerations for Married Couples.
The Illinois statutes have a special provision that allows a surviving spouse to protect the equity in a homestead if the owner dies for as long as the surviving spouse continues to reside in the homestead. Similarly, suppose a homeowner passes and has children under the age of 18 years. In that case, the children can protect the equity in the home until age 18.
If a homestead is left to a surviving spouse and that person moves out and deserts the homestead, leaving at least one other person living in the home, the remaining person can continue to protect the home as long as he or she lives there.
If your property is held as a tenancy in the entirety, the property is jointly owned by a married couple as a single marital entity, not as individuals. Illinois permits tenancies by the entirety, and this might allow debtors to file for bankruptcy and protect more than the homestead exemption amount.
If property is held as a tenancy in the entirety, it is owned as a whole by both married persons and creditors cannot take it to pay the debts of only one owner. For this reason, a tenancy by the entirety is often referred to as a "super exemption," although it is not actually an exemption.
There are limits to the protection provided by a tenancy in the entirety, however. If the bankruptcy filer has tax debts, or if both spouses are liable for a debt (for example, joint credit card debt or medical debt incurred during the course of the marriage), a tenancy by the entirety will not provide protection in excess of the Illinois homestead exemption.
This exemption is one of the trickier bankruptcy exemptions, so it would be wise to consult with a local bankruptcy attorney.
Some states allow bankruptcy filers to use federal bankruptcy exemptions instead of state exemptions. Illinois isn't one of those states. If you reside in Illinois, you must use the state exemptions. Find out more about which state exemptions apply to you in Illinois Bankruptcy Exemptions and Which Exemptions Can You Use in Bankruptcy?
Illinois's homestead exemption is found in the Illinois state statutes at 735 Ill. Comp. Stat. 5/12-901 and 5/12-902 on the Illinois General Assembly website. You can learn how to find state statutes in Laws and Legal Research.
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 on the General Assembly Public Acts area.
Updated April 23, 2021