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Chapter 13 Bankruptcy Chicago - Signing Document

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Chapter 13 Bankruptcy

Is there a right day of the month to file a Chapter 13 bankruptcy case?


The date you file a Chapter 13 bankruptcy case can be critical, depending upon the type of circumstances surrounding your filing. For example, if you are doing a home saver case, which is where you are repaying the mortgage arrears over time while being allowed to make your regular mortgage payment once again, then timing is critical. The first payment due to the Chapter 13 trustee is thirty days after filing. Therefore, no matter when you file a Chapter 13, the payment that's going to be made to the trustee to reorganize your debts is due within thirty days, or on the thirtieth day. Therefore, there is no differentiation on when you file in terms of when your payment to the trustee is due.

However, the key factor here is if you are trying to save a home that's in foreclosure, you obviously haven't made a mortgage payment, or haven't been allowed to make a mortgage payment by the mortgage company for several months, or even years. The key factor here, with a mortgage is that after you file for Chapter 13 bankruptcy relief, your next regularly scheduled mortgage payment becomes due. Thus, if your mortgage payment is due on the first of the month, and your bankruptcy case is filed on the thirty-first of the month, then your mortgage payment is due the very next day.

If you have a skilled bankruptcy attorney, that bankruptcy attorney is going to try and time the filing so that you have not only thirty days to make your trustee payment but you will have approximately 30 days to gather the funds to make your first mortgage payment after the date of filing. What I like to do is file somebody approximately in between the second and the fifth of the month if their mortgage is due on the first. That way, the client gets nearly a full month to gather the resources to make their regularly scheduled mortgage payment.

In addition to the time that the client is allowed to make their payment, it gives the mortgage company ample time to receive notice from the bankruptcy court and update their computer system to allow the mortgage company to receive payments. In many cases, we will file a bankruptcy and the mortgage company will send back my clients' first payment after the date of filing. I then have to explain painstakingly to my client that they are not rejecting your case; they are just not set up to accept your payment yet. Go ahead and send the payment again with a letter of explanation that this is your first payment, and that you filed a Chapter 13 bankruptcy case. Obviously, it's best if everything moves smoothly and seamlessly for my clients. Therefore, for several reasons, I'm going to file after the first of the month if the mortgage payment is due on the first.

Now, in other cases where you have a garnishment, or you have a bank citation, or you have any kind of court proceeding, then it really doesn't matter so much when you file, because you need the immediate relief. I'm talking particularly about a case where you don't have a mortgage, but you do have a vehicle that either was repossessed or is subject to being repossessed, or it's in storage and it's subject to being sold in an auction. In all of those circumstances, you want to file the bankruptcy case as soon as possible to get the relief started immediately.

The trustee payment is going to be due thirty days after filing regardless. Therefore, if you don't have a mortgage case, you don't have to worry about getting extra time to make a mortgage payment, and you want to file as soon as possible to afford your client the relief that they need. In many cases, Chapter 13 bankruptcy cases are filed on the eve of a sheriff's sale date for their real estate property. In those circumstances, where we don't have the luxury of filing it after a certain day of the month to give the client as much time as possible, we just have to file to save the house so that it's not lost in a foreclosure. In those particular cases, I will advise my client that you must be ready for your next regularly scheduled mortgage payment even though that might be due one, two or even three days after the case is filed. You have to be ready; you have to be on time, otherwise your case could blow up right from the outset.

Two things happen in a Chapter 13 when timely payments are not made. One, the trustee can bring a Motion to Dismiss the case. Two, the mortgage company, or any other secured creditor who is supposed to receive payments through the plan, can bring a Motion to Modify the Stay and/or dismiss the case for failure to make payments. Therefore, the timing of when you file a Chapter 13 bankruptcy case is critical for the success of your client when there's a mortgage involved, and it is critical when there's no mortgage involved if you're trying to save property or stop some sort of court action.

My sheriff's sale date has passed on my home. Will Chapter 13 help me?


If your house has already gone to a sheriff's sale date, then Chapter 13 is not going to be an option to reorganize the home. There are some exceptions where the mortgage company will allow you to reorganize after a case has gone to a sheriff's sale, but they certainly do not have to allow it, and in my experience, they rarely will allow it. Thus, the key to filing a Chapter 13 if you are trying to save a home is that you must beat the sheriff's sale. You don't need to beat any other date. It can go to court, you can have a summons, you can have a judgment, you can have the day or evening of the sheriff's sale but you just have to beat the date or the time that the sheriff's sale actually takes place.

Now, that is if you are trying to save the home through Chapter 13. If you are not trying to save the home in Chapter 13, then you can certainly file after the sale date if your intention is to surrender the home. You also have options under Chapter 7 if you are not going to keep your home. In any event, if you are trying to save your home, you must beat the sheriff's sale. Courts and jurisdictions throughout the country have found that the sheriff's sale date, especially in Illinois, transfers ownership from one party to the other. Even though it hasn't gone to court on a motion to approve the sale, the courts have still found that the actual sheriff's sale is a transfer of ownership. Once there is a transfer of ownership, you are no longer the owner, so you do not have the right to reorganize, and the mortgage company does not have to accept your payments, or accept your Chapter 13 proposed plan. If a property has already gone to a sheriff's sale date, Chapter 13 is not going to be a good option for you.

Now, you may have other options that are non-bankruptcy related with regard to the property if you are trying to save it. You might be able to work a deal with your mortgage company. You might have a special right of redemption where you can pay the full amount that you owe and get a possible modification even after it's gone to sale if the mortgage company bought the property back. In my experience, though, the best thing to do is to file your Chapter 13 long before the sale occurs.

The beauty about filing a Chapter 13 bankruptcy case prior to the sale date is that the amount of the mortgage arrearage, the amount that you have to pay back through your Chapter 13, is going to be lessened. If you are able to file bankruptcy in the early stages of foreclosure when you don't have a huge arrearage, you're going to have a greater chance of being able to make your mortgage payments, since the amount of the arrearage to pay back over sixty months is going to be smaller than if you wait until later. Many clients wait until the absolute eve of a sale date, only to realize that they can file a Chapter 13 and stop the sale, but now you have to repay the mortgage arrearage, the part that you fell behind on your mortgage; you have to pay that back within the next sixty months. Paying it back within sixty months could be a daunting task when you look at the fact that you don't have very much in the way of disposable income. Unless you have recovered from some sort of illness, or you had job loss and you are now back working, or your circumstances have changed where you now have the ability to make the mortgage payment on time, and pay the mortgage arrearage over the next sixty months, that's how a successful Chapter 13 bankruptcy case works. If the arrearage is so high, and I have seen cases where someone hasn't made a mortgage payment for 2 to 3 years, there's no way that that person with very little available per month, is going to be able to navigate through the bankruptcy system and make their payments. For those particular clients, we can always file a Chapter 13 to stop the sale date, give the client a little more time to get their affairs in order, and then convert the case to one of a Chapter 7 bankruptcy.

In extreme emergency cases, we can also file what's known as a Skeleton Petition. A skeleton petition will get the Automatic Stay in place, protect the homeowner, and stop the sale date. A skeleton petition is just information about the debtor as well as a list of the creditors, electronic filing declaration, and a statement with regard to social security numbers. The debtor still has to complete a credit counseling session prior to the case being filed. The beauty of a skeleton petition is that it can be prepared in less than 15 to 20 minutes. It can be filed within an additional 5 to 10 minutes and you can stop a sale date with little more than an hour's notice, provided credit counseling has been satisfied.

The key to note is that if you are really trying to save your home through Chapter 13, if it's gone to a sheriff's sale date, you are too late, and you must think of other options with regard to your home.

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