If you’re looking to save a home from foreclosure, chapter 13 will help you provided you file your bankruptcy case before a Sheriff sale has taken place. Chapter 13 will allow for you to pay back your mortgage arrearages over a three to five-year period. You also have to make your regular mortgage payment each month while your case is progressing through the court system. However, if you wait until after the Sheriff sale has occurred, then you are too late to reorganize to save a home under Chapter 13. This issue has been litigated extensively through the courts as to whether or not it’s the Sheriff Sale date or the confirmation of that sale which dictates. The rulings here in Illinois have consistently held that the Sheriff Sale date is the date where ownership transfers away from the homeowner and towards either the mortgage company or a third-party buyer at the auction. Due to this fact, if the Sheriff sale has already passed, it is too late to reorganize the debt under Chapter 13.
You can still file a chapter 13 bankruptcy case after your Sheriff sale; however, you will not be able to save a home to chapter 13. Oftentimes, it makes perfect sense to continue with the chapter 13 to reorganize other types of debt such as vehicle debt, tax debt and any other nondischargeable or dischargeable debt. Regrettably, many people call me after the Sheriff sale has already taken place. In most of those cases, I’m going to recommend a chapter 7 fresh start since the possibility of saving the house through bankruptcy has been eliminated.
The best advice I can give someone who is struggling financially, especially in a mortgage case, is to contact an attorney as soon as possible. The foreclosure process in the state of Illinois can last anywhere from a year or more. It is unfortunate that many people wait until the Sheriff sale has already occurred before they actually get into my office to seek bankruptcy help. The sooner somebody comes to see me for help, the more likely that I will be able to help them and the more likely they will have an affordable chapter 13 repayment plan. Remember, the amount of the arrearage has to be paid back over a three to five-year period. Thus, the higher the arrearage, the more that has to be put into the chapter 13 each month. The higher that payment is, the less likely the client is going to be able to make the payment. By acting quickly, the homeowner has a greater likelihood of keeping their property and reorganizing the debt through chapter 13
