How Does a Homestead Exemption Work?

The term “exemption” is extremely important for any individual or married couple considering bankruptcy and is particularly important in Chapter 7 bankruptcy cases since exemptions allow debtors to exempt assets from liquidation. If you own a home in the Oak Park area and you are considering bankruptcy, it will be essential for you to learn more about the homestead exemption and how it works in Illinois. While the term “homestead” might seem old-fashioned or inapplicable to any assets you might currently own, the term actually refers to your primary residence (such as your home or your condominium). How does the homestead exemption work under Illinois law? Our Oak Park bankruptcy attorneys can explain.

Homestead Exemption Generally

The general point of a homestead exemption is to allow a debtor to exempt a certain amount of equity or interest they have in their primary residence. Each state has its own homestead exemption. Some states permit debtors who are filing for bankruptcy to choose between a federal homestead exemption and a state exemption, but it is important for you to know that Illinois is not one of these states. Instead, under Illinois law, you will need to use Illinois state exemptions.

Any equity in a residence that is exempt means that it will not be liquidated in a Chapter 7 bankruptcy, and it will not be counted in a Chapter 13 case when determining the amount of the repayment plan.

Details of the Illinois Homestead Exemption

If you are filing for bankruptcy in Oak Park or Chicagoland more broadly, the Illinois homestead exemption will be important to consider in your bankruptcy case. Under Illinois law, an individual debtor can exempt up to $15,000 of equity in their residence in a bankruptcy filing. If a bankruptcy petition is filed jointly by a married couple in Illinois, they can double the exemption so that they can exempt up to $30,000 of equity in their residence. Here is what the statute says specifically:

“Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owners or rightly possessed in lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence.”

To break down that language a bit, the statute clarifies that you have the $15,000 exemption, and then it explains that the property must be used as your residence, and the property can be a house, condo, coop, farm, or other property that is used as your residence.

Contact an Oak Park Bankruptcy Lawyer

Do you have questions about how the homestead exemption works in Illinois or how bankruptcy can allow you to keep your home if you file for Chapter 13 bankruptcy? Any questions about bankruptcy exemptions and home ownership can be answered by one of our experienced Oak Park bankruptcy lawyers today. Do not hesitate to get in touch with us to find out more about how we can help. Contact the Emerson Law Firm for details.



See Related Blog Posts:

Bankruptcy Schedules A Through C

Bankruptcy Schedules D Through F

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