David M. Siegel answers in 30 seconds. Watch on YouTube · Read the transcript.
Short answer: In most cases, no. It comes down to how much equity you have. If your equity fits within the Illinois homestead exemption, Chapter 7 protects your home. If you have more equity than the exemption covers, Chapter 13 lets you keep everything and repay creditors over three to five years instead.
Equity is the whole question
This is the fear that keeps more people from calling than any other, and the answer is more reassuring than most expect. Bankruptcy does not take homes from people who owe close to what the home is worth. It looks at equity — what would be left if the house sold and the mortgage was paid off.
If that number is small, or if it fits within what Illinois law protects, your home is not at risk in a Chapter 7.
The Illinois homestead exemption just changed — substantially
Illinois protects a set amount of home equity through the homestead exemption. Effective January 1, 2026, Public Act 104-120 raised that exemption to $50,000 per owner, and $100,000 on a jointly owned home. It had been $15,000 and $30,000 for well over a decade.
That is a significant shift. Homeowners who would have had an equity problem under the old figures — and who may have been told as much a year or two ago — are frequently protected outright now. If you looked into this before 2026 and were discouraged, the answer may be different today.
When there is more equity than the exemption covers
If your equity exceeds what the exemption protects, we do not simply file a Chapter 7 and hope. That is the situation Chapter 13 exists for.
In a Chapter 13 you keep all of your property — house included — and repay all or a portion of your debt over three to five years at a monthly payment you can afford. Nothing is sold. Creditors receive payment through the plan instead of from an asset sale.
Behind on the mortgage is a different problem
Equity and arrears are two separate issues. If you are behind on mortgage payments or facing a foreclosure sale date, Chapter 13 is the tool that stops the sale and lets you repay what you fell behind across the life of the plan while resuming your regular monthly payment.
We work out both questions — your equity and your arrears — before anything is filed, so you know going in which chapter protects your house.
Worried about your home?
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Full transcript of the video
will I lose my house if I file for bankruptcy well it really depends upon the case we’re going to do everything in our power to let you know what chapter is best for you so if you don’t have significant equity in your home then Chapter 7 is going to be the perfect chapter if on the other hand you have available equity that could be taken we’re going to recommend a Chapter 13 where you keep all of your property and you repay either all or a portion of your debt over a period of three to five years at a monthly payment that you can afford
Related questions
- Can bankruptcy stop a foreclosure?
- Will I lose my car if I file?
- Chapter 7 vs Chapter 13: what is the difference?
About the author. David M. Siegel has represented consumer bankruptcy clients in the Northern District of Illinois since 1991 and is the author of several books on consumer bankruptcy. His offices are in Wheeling, South Chicago, Joliet and Westchester.
This article is general information about Illinois and federal bankruptcy law. It is not legal advice, and reading it does not create an attorney-client relationship. Every case turns on its own facts — speak with an attorney about yours.
