Using Chapter 13 to Save a Home
Aurora Illinois Bankruptcy Lawyers & Attorneys
David Siegel: Let's talk about the most common use of a Chapter 13, which is to save a home. How is Chapter 13 beneficial to an Aurora homeowner who may have a home in foreclosure or have fallen behind on the mortgage?
Jesse Barrientes: A lot of times we'll see that people will come in and there's a sheriff's sale that's looming around 'cause they've already gone through the foreclosure and everything else. And so they want to be in their home. They don't want to be dispossessed of that home. They've been there. They need to have a roof over their heads, their children's heads and everything else.
So basically what that's gonna do is it's gonna stop the sale from proceeding. And a lot of times people are in arrears. We talked about it with the Chapter 7. As long as you're not in arrears and as long as you fall into other situations and you qualify you'd be able to do a Chapter 7 even though you have a home and you don't have too much equity or anything like that. However, with a Chapter 13 bankruptcy case in Aurora, a lot of times people have a huge arrearage and they have not been able to get a loan remodification from their lender.
David Siegel: Now the arrearage is the portion that they have fallen behind on their mortgage?
Jesse Barrientes: That's correct.
David Siegel: And that's the portion that you can repay over time? Over a three- to five-year period?
Jesse Barrientes: That's what happens. They will include that and that's a secured debt, obviously. You're a complete arrearage and they will also include – for example, if you have an automobile that you own and it's not leased and that you have, you know, whatever. Maybe $15,000 – whatever it is on it. What's gonna happen is that whole amount is going to be included in the plan.
And what you're gonna have to do throughout the term of the plan, whether it's 36 or 60 months, is to be able to pay your secured creditors 100 percent. And your unsecured creditors, which would be credit cards, those kinds of things as little as 10 percent and as much as 100 percent, depending upon the available income that's left after your allowable expenses.
David Siegel: So the amount that you pay in a Chapter 13 is based on one part on how much you have available per month, income minus expenses?
Jesse Barrientes: That's correct. And sometimes you might be in a situation where you can't file either a Chapter 7 or a 13, the in-betweens. There might be a situation where there's not quite enough income left over in order to fund the plan within that, you know, the 60-month, which is the limit there to be able to fund that and to be able to pay everybody off like you're supposed to.
And so in a situation like that there's really only one thing that's gonna help you and that's either more income or less income. And maybe you might be able to do – well, if you do a Chapter 7 and you owe some on your house, unfortunately, you have to make that decision of whether or not that's gonna be a good thing for your family.
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See Also:
Chapter 7
Misconceptions about Chapter 7
Life after Chapter 7 bankruptcy
Privacy is protected in bankruptcy
Household income qualifications
Converting Chapter 13 to Chapter 7
Converting Chapter 7 to Chapter 13
Chapter 13
Using Chapter 13 to save a home
Choosing Chapter 13 versus Chapter 7
Debt consolidation & late fees
Administrative fees & the bankruptcy trustee
Chapter 13 payment plan dismissal
