Foreclosures are down across the country, however, that’s little consolation for homeowners who are currently facing the loss of their homes. Homeowners who are behind on their payments and are facing foreclosure proceedings can file Chapter 13 bankruptcy to halt the process.

There are a number of benefits to speaking with a Chicago bankruptcy attorney about filingChapter 13 bankruptcy. Filing can eliminate credit card debts, medical bills, and often, 2nd and 3rd mortgages that a consumer may have. It may also be possible to discharge IRS debts that are 3 years or older. The reduction in these debts often makes it possible for homeowners to get current on their mortgages and keep their homes moving forward.

When a Chicago bankruptcy attorney is filing a Chapter 13 bankruptcy on behalf of a homeowner, the judge will apply a means test when making their determination about which debts to discharge. This test will include calculations to determine whether a homeowner can afford to make the monthly mortgage payments in addition to monthly expenses. Additionally, the judge will also seek to determine whether the homeowner has enough remaining income to schedule a repayment plan to cover the arrears stemming from their debts.

It is a complex calculation, however, it’s one that can be worth the effort. Once a homeowner has filed their bankruptcy petition with the court, an automatic stay of the foreclosure is granted by the court. This means that while the Chapter 13 bankruptcy petition is being determined, the home cannot be repossessed or sold by the lender.

As part of the Chapter 13 bankruptcy proceedings, the homeowner can arrange a Chapter 13 plan through which they can make up the arrears owed on their mortgage. These payments can be paid directly to the mortgage lender, or via a trustee depending on the court’s determination. Ideally, it is best to pay directly as this can help a homeowner reduce the fees that a trustee will charge for making the payments.

As long as the homeowner remains current in their obligations, the lender may not foreclose on the property. If a homeowner has additional mortgages or any HELOC’s, these become unsecured debts that can be paid off at discounted rates. Depending on the amount of debt and the individual’s earning potential, this repayment period can last anywhere from 3 to 5 years. Any amounts unpaid at the end of this repayment period will be discharged by the court.