In Illinois, the homestead exemption in a Chapter 7 bankruptcy case is there to make sure that bankruptcy doesn't leave you homeless. The goal is to pay off the debt, not to make you destitute.
That said, there are limits to the exemption. The max for one person is $15,000 and it's doubled to $30,000 if two people own the property.
Beyond that, these four situations may still make your property vulnerable to liquidation when you go through bankruptcy:
- With a mortgage, your homestead was pledged as credit. For instance, you bought the home with cash but then took out a second mortgage to make some updates.
- You still owe the State of Illinois, or some of the municipalities and counties within the state, back due taxes.
- You did not fully pay off people who worked on the property, making improvements or repairs. Examples include builders, mechanics and general contractors.
- The property already had a pre-existing lien.
So, while your property may be protected, do not assume that you'll be able to keep it no matter what. Every case is different and the specifics become very important.
There are other exemptions that you should be aware of. For instance, tools of the trade are often protected. If you're a car mechanic and you need thousands of dollars' worth of equipment to be able to keep working, you may not lose it in bankruptcy. The filing is not intended to ruin your career, but to provide that fresh start. This is why it's so important to know all of your legal rights as you move through the bankruptcy process.
Source: FindLaw, "Illinois Homestead Laws," accessed Nov. 24, 2017