In Illinois, homeowners can take advantage of a unique protection known as the homestead exemption when they pursue bankruptcy or seek protection from creditors. 

Designed to help protect homeowners from losing their residence as a result of changing economic circumstances, the homestead exemption allows owners to safeguard their equity in a residential property, up to a certain amount. It’s one of the most commonly used exemptions during bankruptcy, and it’s an important concept for homeowners to have a handle on – particularly if they’re facing down debt collection efforts by creditors. 

You can find the text of the Illinois “Exemption of Homestead” statute in full here. 

Let’s dive into some of the most common FAQs about the homestead exemption here in Illinois: 

What Is the Amount of the Illinois Homestead Exemption?

Under the Illinois homestead exemption, a homeowner can exempt up to $15,000 of equity in their property, provided that it is suitably covered by the exemption. For married couples filing bankruptcy jointly, it is possible to double the exemption amount, and protect up to $30,000 of equity in a home. The homestead exemption also applies to proceeds from the sale of an eligible homestead property, within the span of a year. 

Do keep in mind that if a property is sold by a bankruptcy trustee, that the exemptions as well as typical “closing costs” must be paid. This is an important calculation to factor in when determining equity in your home when preparing a bankruptcy filing. 

What Types of Property Does the Exemption Cover?

Broadly speaking, the homestead exemption can be applied to any real property used as a residence, including single-family houses, condominiums, co-ops, mobile homes, and so on. 

Unlike in some other states, Illinois homestead laws do not place a cap on the amount of acreage that can be covered under the homestead exemption, in urban or rural areas. 

In order to have your property qualify as a homestead, you must be the legal owner of the property, with your name on all relevant deeds and title documents. 

Does the Exemption Extend to Surviving Spouses and Children?

Illinois state laws do extend the protections of the homestead exemption after death or desertion. The homestead exemption continues to remain in effect for the benefit of the surviving spouse for as long as he or she continues to reside in the homestead, and for children until the youngest surviving child becomes 18 years of age. In the event of desertion by a spouse, the exemption continues to protect the spouse who remains, provided that they continue to occupy the premises of the residence. 

Are There Limits to Protections Under the Homestead Exemption?

While the Illinois homestead exemption can offer significant financial protections to homeowners, it’s also important to remember that it does have its limits, and does not provide absolute protection against creditors. 

For instance, it’s important to keep in mind that the homestead exemption may not apply for certain creditors, including the county and municipal governments, the government of the state of Illinois, or the federal government. Federal laws generally supersede state laws, so if your debt is related to federal taxes owed, for example, you may not necessarily be spared from collection efforts. 

Similarly, the homestead exemption does not necessarily provide shelter if the debts are related to the property itself. For example, if a house is used as collateral for a mortgage, and the borrower falls behind on mortgage payments, the lender still may be able to foreclose on the property, provided that they follow proper procedures and ultimately reimburse the borrower the amount of the exemption in a sale. The homestead exemption may also be limited when it comes to debts incurred by contractors or others paid for doing work on the home. 

While the homestead exemption is automatically applied in Illinois, as a rule, it is also possible for homeowners to waive their homestead rights in writing. 

Who Can I Turn to If I Have More Questions?

For anyone curious about the scope and the limits of the Illinois homestead exemption, talking to an attorney experienced in the fields of real estate and bankruptcy law in your area may be a crucial step forward. 

Consulting with an experienced and knowledgeable local attorney can help you to gain a better understanding of the homestead exemption, as well as other important protections that could help you down the line if you’re purchasing a home,  facing the prospect of mounting debts, or considering bankruptcy as an option for lasting debt relief. An attorney can help you pursue the right course of action for your unique financial and personal situation, based on the distinct variables of your situation. At the same time, it’s important to remember that legal professionals can also offer the force of law to protect you from creditors, in certain circumstances, all while being held to a high standard of conduct by the state and ethics review boards.

About the Gunderson Law Firm

If you’re looking to get a better understanding of the Illinois homestead exemption, or any other aspect of real estate or bankruptcy law in Illinois, do not hesitate to get in touch with the Gunderson Law Firm with any questions you may have. 

At the Gunderson Law Firm, we can get you actual, straightforward answers, tailored for your personal situation. Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific circumstances with strategic plans that are rooted in a deep understanding of local real estate and bankruptcy laws. Our attorneys and staff possess an unparalleled level of expertise, a broad network of connections, and an unwavering focus on providing the practical solutions our clients deserve.