Chapter 7 & Foreclosure
Filing bankruptcy can go a long way toward saving a home that’s in foreclosure. Each chapter of the bankruptcy code will affect the outcome or the continuation of a foreclosure case differently. Under chapter 7 bankruptcy law, and automatic stay will kick in which will temporarily halt a foreclosure case. In a chapter 7, the creditor will bring a motion to modify the automatic stay and will be able to proceed where it left off in the foreclosure process. This delay can last anywhere from one month to four months depending upon the timing and conduct of the creditor.
Chapter 13 & Foreclosure
Under chapter 13 bankruptcy law, the foreclosure case may possibly be stopped indefinitely. This is because the chapter 13 often provides for a reorganization or repayment of the mortgage arrearage. The arrearage is the part that the homeowner fell behind on and now wishes to pay back over a three to five-year period. At the same time that the homeowner is making the chapter 13 payment, he or she will continue to make the regular mortgage payment directly to the lender. So in essence, the homeowner is making two payments. The first payment is the regularly scheduled mortgage payment on time once again directly to the mortgage company. The second payment is a reorganization payment which is paid through a chapter 13 trustee and then distributed out to the various creditors over a three to five-year period. The lenders arrearage portion is one of those creditors that gets paid back over time.
Income Requirements
As you can see, chapter 13 bankruptcy is a powerful tool in dealing with a foreclosure case. There are certain qualifications for chapter 13. You must be someone who has steady income. This income could come from employment, unemployment, disability, Social Security, workers compensation, rental income or any other type of steady monthly income. You also have to have the ability within your budget to resume making your regularly scheduled mortgage payment and put something away towards your arrearage. If the arrearage is too great and I cannot be paid back within a three to five-year period, then the plan going through chapter 13 will be what they call “unfeasible”. If a plan is unfeasible, then it will not be approved by the court and it will not be recommended for confirmation by the chapter 13 trustee.
The Attorney Interview
When you meet with an experienced, bankruptcy attorney, you will be interviewed about your income, your expenses, your assets and your liabilities. The attorney is going to be able to determine whether or not you have the ability to reorganize under chapter 13. The attorney is going to look at all of your sources of income in great detail. The attorney is going to scrutinize your paycheck stubs to make sure you have the proper amount of deductions coming out of your check. The attorney is then going to look at your monthly expenses to see whether or not you have room within your budget to reorganize under chapter 13. If you do not have the ability to reorganize, the attorney will likely recommend a chapter 7 bankruptcy. As I previously stated, chapter 7 will gain a short stay in the foreclosure process. However, it is chapter 13 that will stop a foreclosure case indefinitely provided you have the ability to reorganize under chapter 13.
Illinois Foreclosure Law
Please keep in mind that each state has a different law with regard to foreclosure. In the state of Illinois, the foreclosure case can last anywhere from 11 months to a year or more. Provided you can file a chapter 13 before your home has been auctioned or sold at a Sheriff sale, you will still have the ability to reorganize. If your house has already gone to a Sheriff sale, then chapter 13 is not going to be an option for you in the state of Illinois. For more information on your rights with regard to bankruptcy and foreclosure, contact my office at 847-520-8100. The first consultation is always complementary and we have experienced attorneys on staff to assist you with your financial issues.
