When Should I File A Chapter 13 In Illinois?
Many mortgage banks begin foreclosure proceedings after just two missed payments. Depending on the circumstances, many creditors allow many more missed payments than that. However, there is no guarantee.
Once the pre-foreclosure process begins, it is difficult to stop. After the two missed payments, most banks accelerate the unpaid principal balance. In other words, they stop accepting partial payments. So, even if your temporary financial storm has passed, it’s difficult to reinstate the loan.
Other secured debts are much the same. Most moneylenders are quick to repossess the collateral once the borrower falls behind. That’s especially true of vehicles. It’s a lot easier to hide a car than it is to hide a house. Most creditors don’t want to take that chance, so they repossess automobiles after just a few missed payments.
If you have a secured debt delinquency, bankruptcy helps in at least three different ways.
The Automatic Stay in Chicago
When people buy houses, cars, and other such goods, they sign security agreements. Among other things, the security agreement obligates the borrower to make monthly or periodic payments on a loan. If the borrower violates the security agreement, the lender can repossess the collateral.
But Section 362 of the Bankruptcy Code takes effect immediately, in most cases. Bankruptcy petitioners do not need to show any evidence of fault, negligence, or other wrongdoing to stop:
- – Foreclosure,
- – Repossession, and
- – Debt collection efforts.
Typically, the automatic stay remains in effect as long as the bankruptcy is active. Moneylenders may only get around it if they have special permission from the bankruptcy judge. Such permission is very difficult to obtain.
In Illinois, the automatic stay reverses the negotiating positions between debtor and creditor. Before bankruptcy, the creditor holds all the cards, because of the security agreement. But bankruptcy temporarily invalidates the security agreement. So, the borrower holds all the marbles, since the borrower has physical custody over the collateral.
The Protected Repayment Period in Illinois
Most Chapter 13 debtors have up to five years to repay their secured debts. The trustee (person who oversees the bankruptcy for the judge) combines all secured debt delinquency, and perhaps some other obligations as well, into a monthly debt consolidation payment.
This payment is income-based. As long as the debtor makes the payments on time, the automatic stay remain in effect, in most cases. As a result, bankruptcy debtors reduce delinquency based on what they can afford. The amount the moneylender demands is of no consequence as long as the automatic stay is in force.
Redemption in a Chicago Chapter 13
The redemption option is often an alternative with regard to motor vehicles. That’s because cars and trucks depreciate quickly.
Assume that the debtor paid $20,000 for a car that’s now worth $10,000. If the debtor gives the creditor $10,000, the creditor must write off the other $10,000 and give complete ownership to the debtor. If the judge allows the debtor to make payments, which usually happens, that could mean as little as $167 a month for five years.
Redemption is only available inside bankruptcy, and usually only inside a Chapter 13.
Work With Experienced Lawyers
Chapter 13 may be the only way to save your house, car, and other secured debts. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
Resource:
investopedia.com/ask/answers/081516/how-many-mortgage-payments-can-i-miss-foreclosure.asp
