SAVING YOUR HOME WITH CHAPTER 13 (Illinois)
There are many reasons to file a Chapter 13 but this guide is concerned with saving your home.
Homeowners with mortgage defaults have had the most success in saving their homes through Chapter 13 than any other method. If you have sufficient income to fund a Chapter 13 repayment it works!
Treatment of Mortgage defaults on real estate that is the Debtor's principle place of residence.Chapter 13 allows the individual to pay over a period of time (up to 5 years) the arrearage due to the mortgage company. The mortgage company's claim will include all past due payments plus late fees and all other costs incurred by the mortgage company.
When can a Chapter 13 be filed.A Chapter 13 case can be filed any time before the mortgagee has a judicial sale. It goes without say the sooner the better.
Quick test to be eligbleThe primary test for the homeowner is 1) can he/she pay the current monthly mortgage payments after the case is filed; 2) pay the trustee a monthly payment sufficient to cure the default, and 3) have a sufficient amount left over to pay one's everyday livings expenses.
To be eligbleTo be eligible to file a Chapter 13 one has to have a regular income. The term "regular income" can include multiple sources. The most common source is a job. Other sources include Social Security, Unemployment Compensation, self-employment income, rents, income from a non-filing spouse, and even contributions from family members and/or roommates.
Some other requirements1. As said about the individual must have a regular source of income;
2. Must list all forms of income into the household;
3. The Debtor must provide proof of income for the last 60 days. If one just started a job an affidavit should be sufficient;
4. That the Debtor has filed federal income taxes for the last 4 years. If one was not required to file for one or more of these the requirement can be satisfied by an affidavit;
5. List all debts. This is sometimes a bone of contention with clients. I hear "I don't want to list this or that." This is not an option. Sometimes a debt can be listed and the debt is paid directly and not through the Chapter 13. Some clients don't want to include debts to their credit union; again not an option.
6. When it comes to the amount of the mortgage default most people under estimate what the claim will be. When consulting with a lawyer one is best advised to bring every scrap of paper they have received from the mortgagee and its lawyers. If a foreclosure has been filed it is best to bring it to the lawyer's consultation. The Foreclosure complaint will state the date of the default. Your lawyer can then estimate the amount of the mortgagee's claim.
7. All assets must be scheduled. The market value of the house must be listed. This is important as it will determine what dividend will be paid to unsecured debts. I would estimate that in 90% of Chapter 13 cases the dividend to unsecured creditors is 10% or less.
8. Schedules to be completed include an Income Statement and a budget.
9. Car notes have to be listed. Sometimes a car note can continue to be direct and not through payments to the Chapter 13 trustee. Personally, I don't recommend it.
10. Clients have to complete the Means Test. Your lawyer will discuss its importance and how to fill it out.
11. Before any Chapter 13 case can be filed one has to have Credit Counseling and obtain a certificate from it. The cost is about $15. While I think it is waste of time and money it is a requirement. Any case filed without will automatically be dismissed.
12. The above list is not exhaustive. Experienced lawyers can efficiently go through the process and make easy for you.
Married couples jointly owning the homeWhen the home is owned jointly by a married couple it has to be determined if the case should be filed in one name or filed jointly. The decision will depend on the facts and circumstances. When possible I favor filing the Chapter 13 in only one name.