Can We Save Our Home With Bankruptcy?

 

Save Our Home - Bankruptcy - Foreclosure Defense

Save Our Home – Bankruptcy – Foreclosure Defense

 

This is the bankruptcy case study for Todd, from Steger, Illinois, and his wife Emily. The couple is considering chapter 7 or chapter 13 bankruptcy, but is not sure which chapter is best for them. Let’s explore the details. The couple owns a home in Steger, Illinois with a market value of approximately $110,000. The debt owed on the property to pay it off in full is $103,000. The problem is that they are $27,000 behind on their mortgage payment and close to losing the property to a foreclosure sale. The couple owns one vehicle, a 2003 Nissan Frontier which has 114,000 miles on it.  The vehicle is paid in full with a value of approximately $3000. The couple has a checking account with no money in it. The couple has minor household goods, normal clothing and apparel, term life insurance which is a death benefit only, and a possible workers compensation claim.

Household size

The couple is married with three minor children. Husband is employed for the last 23 years as a laborer earning approximately $44,000 per year. Wife is not employed as she is home raising the children. If we look at their monthly income versus their monthly expenses we are discovering that they are spending more money per month then they are bringing in on the one income of husband. For this reason, chapter 13 is not going to be feasible. Chapter 13 is where you repay your mortgage arrearages over a three to five-year period while making your regularly scheduled mortgage payment on time. Since the couple is running into a deficit each month, there is no likely feasibility at this point, to be able to make both the regular mortgage payment and a chapter 13 trustee payment.

Recommendation – Chapter 7 Bankruptcy

My recommendation in this case would be to file a chapter 7 bankruptcy case. Chapter 7 will eliminate the mortgage debt in full including any possible tax liability on the mortgage deficiency. The couple will not be able to maintain the home for a very long as the foreclosure process will move swiftly through the Cook County court system at this stage of the case. However, the couple will be able to get a fresh start possibly even buy a home again within two years. My advice will change if there is a significant change in income over the next several months. For example, if wife becomes employed or if husband’s income improves, then the couple may have the ability to reorganize under chapter 13. At this point in time, there is not significant income and chapter 7 is the only solid recommendation that I can make.

Act Soon

If you or someone you know is struggling financially with mortgage arrearages or other debt, talk to a bankruptcy professional as soon as possible. There are options available for you. If you delay, some of those options come off the table. For example, you can file a chapter 13 bankruptcy case to save a home that’s in foreclosure up until the time that the house goes to a Sheriff sale. If a Sheriff sale has already occurred, Illinois law is well settled that chapter 13 can no longer be an option to save a home. There are other timing issues with regard to income, assets, and transfers. You want to make sure that you talk to your bankruptcy attorney or another bankruptcy professional as soon as possible to ensure that your assets or your transfers or your income and expenses don’t knock yo

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