By Illinois statute, debtors are entitled to “an estate of homestead” of up to $15,000 in property used as his or her residence. The homestead and all right in and title to that homestead is exempt from sale for the payment of his or her debts. 735 ILCS 5/12‑901.
Additionally, when married couples file jointly, each spouse is entitled to the full exemption for a total of $30,000. This is known as doubling.
So, assume for example, a couple filing Chapter 7 owns a $150,000 home with $125,000 remaining on the balance of their mortgage. Their equity in the home is $25,000. Each spouse can exempt up to $15,000 of equity in their homestead from the bankruptcy estate. The couple can protect their entire $25,000 of equity in the home.
On the other hand, if the couple only owed $110,000 on the home, they would have $40,000 in equity but would still only be able to protect $30,000. The trustee could then liquidate the home, pay the couple their exempt equity of $30,000, and use the remaining $10,000 to pay their creditors. However, considering the expenses of selling a home, if there was little to gain by liquidating the home, the trustee may abandon the property and allow them to keep the property if there is only a small amount of non-exempt value.
Illinois also recognizes tenancy by the entirety with limitations. Tenancy by the entirety is the subject of another post.
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