One of the first questions that those who are contemplating filing for Chapter 7 bankruptcy in DuPage County may have is whether or not they will lose their homes. For most people, their homes are their most valuable assets. Thus, their concerns over whether or not that asset might be liquidated to repay creditors as part of a Chapter 7 case may be well-founded. However, allowances are made for people filing for bankruptcy to protect their interests in certain assets. Perhaps the most well-known is the homestead exemption.
The homestead exemption lets bankruptcy filers exempt a certain portion of the equity they hold in their homes from a bankruptcy case. An example would be one who owns a home worth $300,000. He or she currently owes $280,000 on a mortgage, meaning he or she has $20,000 in equity. If the homestead exemption is $25,000, then the home is protected. Yet if it is only $10,000, the home will be sold, and the owner will receive the exemption amount of $10,000.
Bankruptcy exemptions exist at both the federal and state levels. Currently, the federal homestead is $23,675. Many states allow bankruptcy filers to choose whether the federal or state exemptions will be applied to their cases. However, according to Section 12-120 of Chapter 735 of Illinois’ Compiled Statutes, the state has opted out federal bankruptcy exemptions, meaning that local residents must follow state guidelines.
Information shared by the Kent State Law School shows the Illinois homestead exemption to be $15,000. Under this statute, the person in the aforementioned example could lose his or her home. The law does, however, allow married couples who are filing jointly to combine their exemption amounts. That would allow the homeowner in the example to extend his or her exemption to $30,000 and protect his or her residence provided he or she is filing jointly with a spouse.