The threat of losing one’s home in foreclosure is one of the major reasons Will County families start thinking about bankruptcy.
The financial stress aside, foreclosure is a legal proceeding. It appears on a person’s credit report and in other public records.
Foreclosure means that the lender not only takes the home but also may use garnishments and other collection efforts to collect any outstanding balance on the loan.
Of course, there is the added stress of trying to find a new place to live.
While there are ways to negotiate with a lender, often, the lender simply will refuse to back off of a foreclosure. In such situations, bankruptcy may be the best alternative.
Illinois families facing foreclosure may get some relief through bankruptcy
It is important for families to understand what bankruptcy can and cannot do with respect to saving their home from foreclosure.
Ultimately, the family’s overall financial situation, as well as which type of bankruptcy they are willing to file, will determine the best course of action.
Both a Chapter 7 and Chapter 13 bankruptcy can buy a family some time.
As long as the automatic stay is in effect, a lender cannot go forward with their foreclosure. The automatic stay will, in most cases, apply when a family files their bankruptcy paperwork.
Both types of bankruptcy also protect a family from the lender’s pursuing them for the balance of the loan after the lender sells the home.
A Chapter 7 bankruptcy can be helpful in that it could free a family from other debts so they can better negotiate with their lender or even catch up on their mortgage altogether. However, usually, a Chapter 7 only delays but does not stop a foreclosure sale.
Families who want the opportunity to try to save their home may instead consider a Chapter 13 bankruptcy.
In a Chapter 13, the family will have to agree to make a monthly payment toward their debts, such as their mortgage, over 3 to 5 years. They can include catch-up payments and their ongoing mortgage obligations as part of this plan. If they successfully complete their payments, their loan will be current.