Save Your Home
The filing of bankruptcy triggers the automatic stay which stops all creditors from any action to collect their claim including foreclosure.
A Chapter 7 never permanently stops a foreclosure. In Chapter 7 bankruptcy, the stay lasts only as long as the property is not abandoned by the trustee. A creditor secured by the house (mortgage creditor) can seek relief from the stay to complete the foreclosure if there is danger that the secured claim will become greater than the value of the security during the bankruptcy.
Since the creditor's lien is not eliminated by the bankruptcy, Chapter 7 provides temporary relief from foreclosure, but no lasting solution.
In contrast, in Chapter 13 bankruptcy the stay lasts as long as the case is pending. Chapter 13 is designed to allow debtors to cure defaults in their home mortgages by paying the arrearage over as long as 3 to 5 years.
What happens when a house goes to foreclosure?
Illinois statutory law provides for two steps in the foreclosure process before the lender can sell the house on the courthouse steps.
The first statutory step is when the homeowner misses four (4) consecutive months of mortgage payments on their first mortgage. At that point the first lender has the legal right to file the Foreclosure Law Suit.
The second statutory step is when the first mortgage lender actually files the Foreclosure Law Suit. The date the suit is actually filed with the court starts the Redemption Period which by Illinois law is seven (7) months. At the end of the Redemption Period if the homeowner has not paid the amount in full or reached some other deal with the lender, the sale would occur.
Foreclosure sales are typically conducted on the steps of the county courthouse. At the foreclosure sale, the lender typically bids the amount that is owed them on the note. Other bidders must top that bid to buy the house.
After the foreclosure sale is concluded, the winning bidder is the owner of the house. Liens that are junior to the foreclosing creditor, typically second mortgages or HELOC lenders, are cut off: that is, they lose their secured lien on the property.
Further details under Chapter 7:
If you have no equity in your home, a Chapter 7 will allow you to get rid of the mortgage and second mortgage or HELOC.
Many homeowners continue to live in their home after their bankruptcy and as their mortgage and HELOC's have been eliminated, they live "payment free" until the Foreclosure Sale actually happens. Which with the help of a Foreclosure Defense Attorney can be for eighteen (18) months or longer.
Further details under Chapter 13:
If you fall behind on payments, and have some equity in your home, Chapter 13 bankruptcy may be a better choice for your because it allows you to pay off the arrearages (mortgage) over time and therefore face less risk to losing your home to the trustee. A critical consideration in a Chapter 13 case is whether a debtor whose home loan is in default can make the larger mortgage payments (the missed payments plus the arrearages) over the repayment period (three to five years).
Contact a DuPage County Bankruptcy Attorney
For a free consultation with an attorney to discuss how bankruptcy could help save your home, please call 630-296-5084 or contact our Naperville law firm online.