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Filing for Bankruptcy Will Pause Foreclosure Proceedings

Posted on in Foreclosure

IL debt attorneyIf you are significantly behind on your mortgage payments, you probably have some options available to you through your lender. Your lender might be willing to work with you by modifying your loan or setting up a plan through which you can get caught up on your payments. This all sounds good, but what happens if your mortgage is not the only obligation you are behind on? Many people who are delinquent on their house payments are also struggling with other types of debt too.

In some cases, the debt issues are so problematic that foreclosure becomes an imminent possibility. If you have received notice that your lender intends to foreclose on your house, you need to take action in order to save your home.

The Automatic Stay

When you file for financial protection under the United States Bankruptcy Code, the bankruptcy court automatically issues an immediate stay on all debt collection and enforcement activities pertaining to you. This means that creditors cannot call you or send you letters while your bankruptcy case is active. The stay also applies to foreclosure proceedings. Once the stay is issued, your lender must pause your foreclosure case or risk being sanctioned by the bankruptcy court. Keep in mind, however, that the stay simply pauses the proceedings. It does not make stop the foreclosure permanently.

Options for Keeping Your Home

Presuming that you wish to keep your home, your path to doing so will be different depending on the type of bankruptcy you file. In a Chapter 7 bankruptcy, you may be required to liquidate your assets to pay off a portion of your debts before the remaining eligible debts are discharged. If the applicable exemption laws allow you to keep your home, your mortgage debt will not be discharged, and you will need to enter into a reaffirmation agreement with your lender about paying it back. If you do not keep up your end of the deal, the lender could restart foreclosure proceedings after your bankruptcy is closed.

In a Chapter 13 bankruptcy, the goal is to reorganize your debt so that you can better manage your obligations. Your mortgage may be included in this payment plan for the duration of the plan—between three and five years—after which you will need to sign a reaffirmation agreement with your lender to cover the remainder of the mortgage.

Contact a Lake County Foreclosure Defense Attorney

For more information about the foreclosure process and whether bankruptcy is a viable option for your situation, contact an experienced Libertyville foreclosure defense lawyer. Call 847-549-0000 for a free consultation and case review at Newland & Newland, LLP today. We are ready to help you protect what is important to you.

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

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