HOMESTEAD RIGHTS IN ILLINOIS

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HOMESTEAD RIGHTS IN ILLINOIS

Homestead protection laws are designed to prevent homeowners from becoming homeless because of economic hardship.

Anyone who owns and occupies a home as a primary residence can exempt $15,000 worth of real estate from a creditor's claim. If both spouses appear on the title, they can exempt up to $30,000 of the value in the home. This means if the total equity of the home does not exceed $15,000 or $30,000 for joint property, then a creditor cannot sell the property to satisfy a court judgment, and creditors cannot get it through bankruptcy.

THE HOMESTEAD EXEMPTION IS AUTOMATIC IN ILLINOIS

However, the homestead exemption is not absolute protection against creditors. If there is more equity in the home than the exemption amount, a creditor can still seize and sell the entire property and the exemption does not allow an owner to avoid paying a federal tax debt. Even more significantly, there's no protection if an owner uses the house as collateral for a mortgage. A bank or mortgage lender will always be able to foreclose if the owner becomes delinquent on mortgage payments – although the first $15,000 or $30,000 of the foreclosure sale proceeds will belong to the homeowner.

HOMESTEAD WAIVER

Whenever homestead rights exist, they act as a cloud on the title and a mortgage company cannot recoup all its losses up to the full loan amount in case of a foreclosure, since part of the property is exempt from creditors' claims. Therefore, if you're taking out a mortgage in Illinois, the bank will usually require you to waive your homestead protection, requiring that an owner gives up their right to keep the first $15,000 or $30,000 from the sale.

NOT ON THE TITLE?

In Illinois, the homestead exemption can be claimed ONLY by someone who owns and occupies the home. So, if only one spouse appears on the?deed or title, then that spouse alone has the right to claim a homestead interest. Illinois law is very clear, however, that releasing or waiving homestead rights requires the consent of both spouses. So even if you don't own the homestead property, you'll still need to sign a waiver of homestead rights to enable your spouse to mortgage the home.