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How does Illinois' homestead statute protect against foreclosure?

In Illinois, homeownership is a milestone, a step signaling success and the achievement of the American dream. Because of that symbolic value, the prospect of foreclosures and its alternatives can be especially frightening. But fortunately, Illinoisans stuck in a scary financial situation can sometimes stop foreclosures.

How so? Through Illinois' homestead statute, in concert with bankruptcy law. That is, a person facing foreclosure might file for bankruptcy, which would halt the foreclosure. From there, the homestead statute would apply, protecting the property from the bankruptcy. Thus, at the end of the bankruptcy process, the property would come out free of the debt prompting the initial foreclosure.

What is the criteria for a property to qualify for the homestead exemption? Because the law exists mainly to protect individuals from becoming homeless, a person may claim a certain amount of his or her property value as 'exempt' during a bankruptcy. The law does not care about factors like how big the property is or how long a person has owned the house. In other words, if an Illinoisan files for bankruptcy, he or she can designate up to $15,000 of the property's value as covered by the homestead exemption. This amount doubles to $30,000 if a couple jointly files for bankruptcy.

But while the exemption normally helps, there are some exceptions. For example, the exemption won't stop the state of Illinois from collecting past due taxes. Ditto for taxes owed to county and municipal governments. The exemption also won't protect against debts held by builders, contractors or mechanics who did work on the property.

Facing a foreclosure is scary stuff. Illinoisans facing that predicament may benefit from discussing their situations with an experienced bankruptcy attorney, someone familiar with foreclosures and how to minimize their impact.

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