How Does Bankruptcy Impact Foreclosures and Evictions?

Filing for consumer bankruptcy can come with multiple benefits and protections for homeowners and renters, including those who are facing foreclosure or eviction. The automatic stay initially protects debtors from foreclosure or eviction as soon as you file for bankruptcy, and in some cases, filing for bankruptcy can permanently stop a foreclosure or eviction, allowing you to remain in your home. Our Oak Park consumer bankruptcy attorneys can provide you with more information about how bankruptcy impacts foreclosures and evictions in different types of bankruptcy cases.

Automatic Stay Temporarily Stops Foreclosure and Eviction Regardless of the Type of Bankruptcy

Whether you are filing for Chapter 7 bankruptcy in Illinois or Chapter 13 bankruptcy, or even if you are filing for Chapter 11 bankruptcy as a consumer, the automatic stay will stop all creditor actions against you for the time being. What this means is that, if you are facing foreclosure or eviction, as soon as you file for personal bankruptcy, the mortgage servicer or landlord will not be able to move forward with foreclosure proceedings or eviction proceedings.

For many homeowners and tenants, even if they will ultimately not be able to remain in their homes, the automatic stay provides extra time to make plans for new living arrangements and to plan ahead more generally. Depending upon the debtor’s circumstances and the type of bankruptcy they are filing for, it may be possible to stay in the home during and after the bankruptcy case.

How Foreclosures and Evictions Work in Chapter 7 Bankruptcy Cases

Chapter 7 bankruptcy is a type of liquidation bankruptcy. What this means is that, when you file for Chapter 7 bankruptcy, all of your non-exempt assets will be liquidated so that creditors can be repaid. Keep in mind that Illinois law includes a wide range of exemptions, so you will not lose all of your property.

However, in a liquidation bankruptcy, especially when you are behind on your mortgage or rent, it is unlikely that you will be able to permanently stop a foreclosure or eviction in order to remain in your home. Chapter 7 bankruptcy does not present the option of catching up on mortgage or rent payments and staying in the property.

Chapter 13 Bankruptcy and Foreclosures or Evictions

When you are facing foreclosure or eviction, Chapter 13 bankruptcy works a bit differently. Since Chapter 13 bankruptcy is a type of reorganization bankruptcy, the automatic stay will still initially stop a foreclosure or eviction, but you may be able to catch up on mortgage or rent payments you owe in order to remain in your home. This is a common practice for homeowners who are behind on mortgage payments.

In some cases involving debtors who rent their homes, it can be possible to catch up on back rent owed and to remain in the property through the lease term. There are, of course, additional laws in Illinois governing evictions and the eviction process, so it is important to seek advice from a lawyer.

Contact a Bankruptcy Attorney in Oak Park

Do you have questions about how bankruptcy will affect a foreclosure or eviction? You should get in touch with one of the experienced Oak Park bankruptcy lawyers at our firm. Contact the Emerson Law Firm to learn more about how we can assist you.


See Related Blog Posts:

Debt Collectors Cannot Charge “Pay-to-Pay” Fees

Can I Change My Mind After I File for Bankruptcy?

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