Will I Lose My Home If I File Bankruptcy in Illinois?

 Posted on December 27, 2025 in Residential Real Estate

Filing for bankruptcy in Illinois does not always mean you will lose your home. Whether you can keep it depends on several factors, including the type of bankruptcy you file, your home equity, and whether you are current on your mortgage. If you are considering bankruptcy, a Lisle, IL bankruptcy lawyer can help you understand how Illinois law applies to your situation. As of 2025, Illinois bankruptcy exemptions and federal bankruptcy rules still protect many homeowners.

Does Bankruptcy Automatically Mean I Lose My Home?

Filing for bankruptcy does not automatically result in losing your home. Bankruptcy is designed to give people relief from overwhelming debt, not to punish them. Many homeowners are able to keep their homes, especially when they are using bankruptcy to catch up on payments or protect equity. The outcome depends on the details of your finances and which bankruptcy chapter applies.

How Does Chapter 7 Bankruptcy Affect My Home?

Chapter 7 bankruptcy focuses on eliminating unsecured debts, such as credit card balances and medical bills. In some cases, assets may be sold to pay creditors, but Illinois law provides protections for homeowners.

Illinois allows a homestead exemption under 735 ILCS 5/12-901. This law protects a certain amount of equity in your primary residence. As of 2025, Illinois allows up to $15,000 in equity per homeowner to be protected. If you are married and both spouses own the home, the exemption may double. Next year, that will significantly increase to $100,000. If your equity is fully protected by the exemption, your home usually cannot be taken in a Chapter 7 case.

Can Chapter 13 Help Me Keep My Home?

Chapter 13 bankruptcy is often used by homeowners who want to keep their property. Chapter 13 allows you to create a court-approved repayment plan, usually lasting three to five years. This plan can help you catch up on missed mortgage payments over time while stopping foreclosure actions.

Under federal bankruptcy law, specifically 11 U.S.C. § 362, filing bankruptcy triggers an automatic stay. This stay temporarily stops foreclosure proceedings while your case is pending. For many homeowners, this breathing room is one of the biggest benefits of Chapter 13.

What if I Am Behind on My Mortgage When I File for Bankruptcy?

Being behind on mortgage payments does not automatically mean you will lose your home. In Chapter 13 cases, missed payments can often be spread out and paid through the repayment plan. As long as you can afford ongoing mortgage payments and the plan payments, many homeowners are able to stay in their homes. Chapter 7 does not provide the same catch-up option, but it may still protect your home if you are current and your equity is within exemption limits.

Are Second Mortgages or HELOCs Treated Differently During Bankruptcy?

Second mortgages or home equity lines of credit can potentially affect your options. In certain Chapter 13 cases, junior liens may be removed if the value of the home does not exceed the first mortgage balance. This is a complex process and depends on precise property values and loan balances. Not every homeowner qualifies, but it can be an important tool in some cases. Talk to your attorney about the specifics of your case to find out how this could affect you.

What Should I Consider Before Filing Bankruptcy?

Before filing, it is important to understand how bankruptcy fits into your overall financial picture. Factors that often matter include:

• The amount of equity in your home
• Whether you are current or behind on your mortgage
• Your income and ability to make plan payments
• The type of debts you are trying to resolve

Every situation is different, and small details can change the outcome.

Schedule a Free Consultation With Our Wheaton, IL Bankruptcy Attorney

At The McCormick Law Firm, LLC, we take a straightforward, neighborly approach to helping people understand their options. We offer discounts for military members, veterans, and first responders, and we focus on making the process easy to understand from start to finish. When you work with us, you work directly with Attorney McCormick, not a rotating team. Call 630-517-8570 to schedule a free consultation with our Lisle, IL bankruptcy lawyer.