The honest answer is it depends. You will certainly have the ability to keep your home provided that you make timely payments. Allow me to explain. One of the main benefits of filing Chapter 13 or the main reason why people file Chapter 13 is in order to save their real estate and other property. Property can be saved through Chapter 13 by putting everything you are behind on the mortgage, something called mortgage arrears, into your bankruptcy plan and paying that back over a three to five year period. You can also put property taxes and the like into your bankruptcy plan in order to repay those debts through your bankruptcy. The total that you are behind on your mortgage needs to be paid at 100% over the life of your plan. The most important thing to know is that you will have to make your regular mortgage payment once your Chapter 13 is filed. Thus, you will be making your regular payment as well as the Trustee or bankruptcy plan payment.
Real Life Example
For instance, here’s an example. Michael and Abby own a home worth $100,000 to which they owe $120,000 on and they are behind $20,000 on their mortgage. Their mortgage payment is $1000 a month. Michael and Abby want to save their home so they file Chapter 13 bankruptcy, place the $20,000 of mortgage arrears into their bankruptcy plan and pay that back in sixty installments over five years. But once they file their bankruptcy, they will have to resume their regular mortgage payments.
Chapter 13 and Foreclosure Timing
The above example illustrates how Chapter 13 is a powerful tool that will allow you to save a home. The deadline to file a Chapter 13 bankruptcy in order to save a home is before it is sold at an auction or Sheriff’s sale. The foreclosure process is as follows: once a judgment of foreclosure is entered, the house will be sold at auction no earlier than ninety days from the date of judgment. A sale date will be set and the house will be sold in a foreclosure sale. Once the house is sold at a foreclosure sale, it can no longer be saved through Chapter 13. But it’s important not to wait to file your Chapter 13 bankruptcy because every month you fall behind on your mortgage, that’s more that you’ll have to pay back and the higher your plan payment will be every month. If you can file early, you will have a greater chance of success. The lower the amount to pay back over sixty months, the lower your monthly plan payment will be. That is the best way to save your home through Chapter 13 bankruptcy.
Don’t File Alone
Chapter 13 is a complicated case that requires specific knowledge of the bankruptcy code and the entire bankruptcy process. Many have attempted to file Chapter 13 on their own (pro se) only to have the case dismissed by the Trustee or by a creditor that was not getting proper treatment. If you seek a highly skilled Chapter 13 bankruptcy attorney, you are going to have the greatest likelihood of success. For example, in the Northern District of Illinois, there are three standing Trustees that your case can be assigned to. Each Trustee handles cases a little differently. For example, one Trustee will allow you to keep whatever tax refund you receive while in your repayment status. The other two Trustees have different rules. One will allow you to keep $1,200.00 or less and the other Trustee wants you to turn over the entire refund. If you fail to turn over the refund, your case can be dismissed. This is just one example of things that you would not know from reading the bankruptcy code. Your attorney will be versed in these procedures and will be able to advise you accordingly.
