The Homestead Exemption in Illinois has been a small but useful part of the many exemptions an Illinois resident may assert in the face of enforcement of a judgment or in a bankruptcy. In January 2026 the exemption was increased in a big way.
An Illinois homeowner facing a judgment creditor or a bankruptcy may be threatened with the loss of the equity in their home. Even if the debt or the bankruptcy involves only one of the married homeowners, this can be scary and financially crippling. Under the law, when the homeowner living in their Illinois personal residence has equity in the home, they can in most instances retain the Homestead Exemption amount created by Illinois law if the home is subject to sale to pay a debt or in a bankruptcy.
Most recently, the amount of the exemption was $15,000, and each owner on title that is living in the home gets the same exemption. So spouses were able to claim a $30,000 exemption together.
Beginning January 1, 2026, the Homestead Exemption for Illinois was modified to increase the exemption to $50,000 for each title owner living in the home. Spouses on title are now able to claim an exemption of $100,000, which is a huge difference for those needing to protect equity in their Illinois home.
Who should be thinking about this change in the law?
Estate planners who focus on the intersection of asset protection planning and estate planning will consider the new exemption limits as well.
Estate planning clients often engage in their own planning. Looking to avoid probate costs by putting their children or others on title, or transferring their ownership altogether, is a private strategy often concerning to the estate planning attorney. This may seem useful to the client, but the strategy can backfire and considering the entire picture is essential — especially now with the enhanced Illinois Homestead Exemption.
Lenders and others making loans to homeowners and entering into contracts with homeowners will do well to consider the new exemption when determining whether to do business with a homeowner.
If you have questions about the change in the law, whether for debtor/creditor considerations or estate planning, the Attorneys at Marc D. Sherman & Colleagues PC can set up a consultation. Reach out here for contact information: https://mshermanlaw.com/contact/
