Filing for bankruptcy is often utilized as a means to pause the foreclosure of one’s property. The length of time that bankruptcy helps to prevent foreclosure is dependent upon whether an individual files for Chapter 7 bankruptcy or Chapter 13 bankruptcy. It’s also dependent upon your ability to continue paying your normal mortgage payments each month and whether your lender intends to be extremely aggressive. 

When someone files for bankruptcy – regardless of whether it’s Chapter 7 or Chapter 13 – the court will issue an injunction, commonly referred to as an automatic stay. This automatic stay prevents the bank from foreclosing on your home, during the bankruptcy process no matter the number of days after that the foreclosure was supposed to take place.  If you are considering bankruptcy to prevent the foreclosure of your home, contact our skilled bankruptcy attorney today at Chicago Bankruptcy Clinic.

Chicago Foreclosure and Bankruptcy

Chapter 7 Bankruptcy  

A Chapter 7 bankruptcy process is generally quicker than Chapter 13, often taking no more than six months to complete. 

While this stay is extremely beneficial, it doesn’t mean it’s impenetrable. Lenders can still file a motion for relief from the stay, which allows them to keep the foreclosure process moving forward during your bankruptcy case. Even when this motion is granted, sometimes lenders choose not to resume the foreclosure process right away. This has actually become an issue since many lenders choose not to foreclose on consumers’ collateral. When and whether they choose to do so is their prerogative. 

Also important to note is that while your name is on the deed to your home, you must still pay for your insurance and any other related expenses, such as association dues. It may be a while before your lender forecloses on your home so you will likely be obligated to pay these expenses for a while. 

Chapter 13 Bankruptcy

While Chapter 7 bankruptcy often takes no more than half of a year to complete, Chapter 13 commonly takes between three and five years to conclude. Under Chapter 13 bankruptcy you must continue to pay back a portion of your unsecured debts. 

Your payment plan is also dependent upon your income. If your income is below the median for a family of your size in Illinois, your payment plan will last for three years. However, if your income is above the median for the same when you file, your payment plan will last for five years. The good news though is that so long as you keep paying your payments each month during the duration of your payment plan, the automatic stay will continue to prevent the foreclosure of your property for that entire period. 

This is extremely helpful because many individuals who file for Chapter 13 bankruptcy do so because they are so behind on their mortgage payments that it becomes unmanageable. Since many people are unable to pay the bank back in lump-sum payments, filing for Chapter 13 bankruptcy ensure that their past-due payments are broken down into much smaller, more manageable payments that are added to each month’s payment going forward. 

Regardless of the type of bankruptcy that you file, if you do not maintain the proper monthly payments moving forward, your house can still be foreclosed upon before the end of your payment plan. But the good news is that if you properly pay back your past-due payments through your Chapter 13 repayment plan, you can stop the foreclosure altogether.  

Should You File Bankruptcy Because of a Foreclosure?

No one is prepared to receive a letter in the mail informing him or her that his or her property is to be foreclosed upon. Since most of us are very attached to our homes, the idea of having to give them up can be emotionally overwhelming. In response, we may immediately seek to file for bankruptcy to avoid our home being taken from us. However, before you rush to do anything of the sort, it’s important to take a good, hard look at your finances. While filing for bankruptcy may afford you some extra time to deal with the situation, if you don’t have the funds to be able to pay back your past-due payments, filing for bankruptcy likely won’t be able to help very much. 

Your attorney should never pressure you to file for bankruptcy. If he or she does, it’s important that you consult with a different attorney. No one can make that decision for you.

Contact Our Experienced Chicago Bankruptcy Attorneys

At Chicago Bankruptcy Clinic, we will handle all the details of your bankruptcy filing with precision and professionalism. We are familiar with the rules and procedures of the local bankruptcy courts and have developed working relationships with bankruptcy trustees in jurisdictions throughout Chicago. Our legal team has a well-earned reputation not only as dedicated advocates of our clients but as honest brokers as well.

If you are considering filing for bankruptcy, don’t go it alone. When you work with our experienced bankruptcy lawyers, you will have peace of mind knowing that debt relief is on the way. Please contact our office today for a free consultation.