Foreclosures

Bankruptcy Attorneys Helping Residents of DuPage County and Surrounding Areas

Foreclosures are usually initiated when a homeowner has fallen delinquent on multiple mortgage payments. The lender lets the homeowner know about the deficiency, and the homeowner may try to use an alternative to foreclosure, such as requesting a loan modification or conducting a short sale. However, sometimes a debtor can file for bankruptcy to save their home or delay the foreclosure. If you are interested in filing for bankruptcy to avoid or delay a foreclosure, you should consult the DuPage County foreclosure lawyers at the Bankruptcy Center of Illinois.

Foreclosures

Bankruptcy is a judicial proceeding that you may use if you are unable to pay significant amounts of debt. Sometimes people with significant debt fall behind on mortgage payments. Filing a bankruptcy petition stops the usual relationship of rights between a debtor and their creditors. Both foreclosure and bankruptcy can have an adverse impact on your credit score; however, with bankruptcy, you can get rid of all your dischargeable debts and get a fresh start.

Chapter 7 and Chapter 13 bankruptcy provide different kinds of relief from foreclosure. Filing for bankruptcy may not permanently stop foreclosure, but it does trigger an automatic stay, regardless of which type you file. During the automatic stay, all collection efforts by creditors are halted, which means that the bank cannot foreclose on your home until the stay is lifted.

If your home was already scheduled to be sold at auction, this proceeding will be postponed for three to four months after a bankruptcy petition is filed. However, a creditor can move to lift the stay, and in that case, the sale may be postponed, but for a shorter period. A foreclosure attorney in DuPage County can advise you on your options.

Chapter 7 Bankruptcy

When you file for bankruptcy under Chapter 7, your non-exempt property will be sold to pay off certain debts. Your remaining dischargeable debt is discharged, but filing does not usually stop foreclosure permanently. However, you can delay foreclosure by filing under Chapter 7.

Under Chapter 7, you can use a homestead exemption to protect a portion of the equity in your home. Illinois exemptions allow you to exempt a maximum of $15,000 in equity in your home. If your spouse and you file a joint bankruptcy, and you both have an ownership interest in the home, you can protect a maximum of $30,000 in home equity. Even so, exemptions may not protect your home from being liquidated to pay your creditors under Chapter 7. The automatic stay can stall the sale and allow you to negotiate with the lender, but Chapter 7 bankruptcy is not a good choice if you want to save your home permanently.

Chapter 13

A DuPage County foreclosure attorney can help you make a plan to pay off your debt to keep your home under Chapter 13. Chapter 13 allows you to catch up with your mortgage payments as long as you also meet your current mortgage obligations. Under Chapter 13, you can repay the arrearage over 3-5 years. It is important to be aware that this option is only available if you have enough income to not only keep current on your current mortgage payments over that period, but also make monthly payments to address the delinquency as part of a plan. If you are able to make all the requisite payments, you can avoid foreclosure and keep your home.

Lien Stripping

Chapter 13 is particularly helpful if you have multiple mortgages, and you are “upside-down,” meaning that your mortgage is greater than the fair market value of your home. When the value of a home has dropped, such that it is worth less than the original mortgage, a junior mortgage can be “stripped,” meaning that it is reclassified as an unsecured claim, which is the lowest priority debt. Lien stripping can be used to stop a foreclosure, and the debt can be eliminated altogether.

Essentially, when you request that the court strip a junior mortgage, you are asking for a mortgage that is not fully secured to be converted into unsecured debt. After you complete your Chapter 13 plan, all the unsecured debt included in the paperwork is discharged.

Retain a Foreclosure Lawyer in DuPage County

It can be difficult to keep up with monthly mortgage payments, particularly if your circumstances and the value of the home have changed since you initially bought it. If you are interested in saving your home from foreclosure or delaying a foreclosure, you should consult the Bankruptcy Center of Illinois. Call us at (773) 993-0024 or contact us via our online form.