John Roska: The Law Q&A March 31, 2013
Q: What will happen to real estate that I own if somebody sues and gets a judgment against me? I inherited a vacant lot here in Illinois, and an unoccupied house in another state. Would that property get sold?
A: It could happen, but whether it does depends on lots of ifs. It requires a dedicated creditor, who's determined to complete an uphill climb.
First, a creditor must get a judgment against you. If they do, they must then turn that judgment into a judgment lien. That's easy to do, but if they don't, there's no lien the creditor can enforce against your real estate.
If your creditor records a judgment lien, they can then try to go after your real estate. But that leads to other ifs, because even if they try there's no guarantee they'll succeed.
That's because real estate that's your residence can be protected using the "homestead exemption." And real estate that's NOT a homestead — like your two vacant properties — still isn't very easy for creditors to take.
The Illinois homestead exemption is $15,000 for an individual, and $30,000 for a married couple. That exemption puts the debtor(s) first in line to claim those amounts from the proceeds of any forced sale of their residence.
In practice, the homestead exemption stops most creditors from trying to sell a residence to pay off a judgment lien. Unless it's an extremely valuable house, with no liens, creditors simply won't mess with a judicial sale of someone's homestead. Instead, they'll simply wait for when you sell, to see if the proceeds pay off their lien.
Note: We're talking about judicial sales to enforce a lien imposed involuntarily against your real estate, as a result of a judgment. Those sales are rare. Judicial sales to enforce voluntary liens (mortgages) happen all the time.
With non-homestead real estate, it's slightly different. The fact it's not exempt gives the creditor an easier path, and increases the chances that a creditor will bother with a judicial sale to pay off their lien.
But, it's still not easy. The creditor must pay fees to have a sheriff "levy" on the real estate, and there are risks to doing it wrong. Although not as rare as forced sales of homestead property, sales of non-homestead property are still pretty rare.
If, however, the sale of the vacant land will easily pay off the judgment, and if the creditor is experienced with such sales, it could happen.
The out-of-state property adds a few more ifs. If the creditor finds out about it, and if they then pay someone there to record the judgment, and record a lien, and mess with a sale, it could sell. But adding those extra ifs to all the others makes a sale in another state pretty unlikely.
So, a creditor will have to jump over lots of ifs for your real estate to get sold to pay your debt. It's probably a slim risk, but nobody can say for sure.