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Condominiums in a Joliet or Will County Bankruptcy

When you file a Chapter 7 Bankruptcy in Will County, Cook
County, or other area in Illinois, and you indicate on your bankruptcy
schedules that you intend to surrender real property and discharge the
underlying mortgage debt, I often recommend to my clients that they stop paying
the mortgage as soon as the decision to surrender is made. Upon discharge at
the conclusion of the bankruptcy, the debtor’s ongoing contractual obligation
to pay will be discharged by the Bankruptcy Court, meaning that the debtor no
longer has to legally pay the mortgage. Of course, the bank now may move to
foreclose on the property and re-take title to protect its secured interest in
the now-discharged loan, but the lender will not incur any new legal liability
to the bank. This applies even if months (or even years) pass between when the
debtor filed his Chapter 7 case, and when the bank finally completes the
foreclosure on the surrendered property.



You should pay special attention to situations where the property you are
surrendering real property that is subject to an fee or assessment from a
condominium association, homeowner’s association, or cooperative corporation.
Under 11 U.S.C. § 523(a)(16), pre-petition fees and assessments are dischargeable in
a debtor’s bankruptcy but all post-petition condo fees, association dues, or
co-op charges are not dischargeable, “for as long as the debtor or the trustee
has a legal, equitable, or possessory ownership interest in [the property].
This means that you are legally obligated to pay these fees (but not the
mortgage) for as long as you own the property – up to and until the lender
formally takes title to the property in foreclosure. Given that some lenders
can take months (or even years) to foreclose on a property surrendered in a
Chapter 7, 11U.S.C. § 523(a)(16) places a significant financial burden on owners of
condos, homeowner’s association members, and co-op tenants. The Automatic Stay
will provide some relief to the debtor during the pendency of the bankruptcy,
and the association cannot take any action to collect the fees while your case
is before the court. However, the monthly charges will continue to accrue. If
you do not pay the fees, the association may commence legal proceedings or make
other appropriate efforts to collect the debt.



If you own property that is subject to such a fee or assessment, be sure your
Joliet bankruptcy attorney is aware of these obligations. While there is no way
to discharge the post-petition fees or assessments, it is possible to minimize
the impact of 11U.S.C. § 523(a)(16). Options include:



1. If possible, wait to file your bankruptcy case until after the foreclosure
auction has taken place, thereby ensuring all fees are pre-petition debt.



2. If you are no longer residing in the property, consider renting out the property,
and use the rental income to pay the association dues.



3. Don’t pay. However, if the debtor lives in a jurisdiction where foreclosure
is taking years, the debtor risks exposure to a lawsuit for personal liability.
Nevertheless, once the foreclosure is complete, the foreclosing lender must
cure the deficient fees and assessments in order to pass clear title to the new
buyer. This option involves a great deal of uncertainty, and risk to the
debtor, but may be the only option in some circumstances.


4. Consider a short sale. Since your mortgage deficiency will be discharged (or
was already discharged), a
short sale can significantly shorten the amount of time the property is in your
name, and can expedite the transfer of title.

If you have a condo, please make sure to let us know and we can advise the best route in
bankruptcy.

Please call Hamilton & Antonsen for more information. 815.729.9220 info@halawoffices.com

Can I Save My Home If I File Bankruptcy in Will County, IL?

 Yes. Filing bankruptcy in Joliet or Will County may save your home. It is important to hire a local Joliet bankruptcy attorney to help you through this process.  You may be able to save your house from foreclosure by filing a Chapter 13 bankruptcy.  A Chapter 13 bankruptcy allows you to put your arrearage (the payments you have missed) in your Chapter 13 plan and pay them back over the term of your plan (usually 5 years).  You will have to pay the entire amount of your arrearage back over this period of time.  This in effect “catches up” your mortgage payments, keeping the mortgage company from foreclosing. A good Joliet bankruptcy lawyer can walk you through the process.

Other than allowing you to catch up your back payments the bankruptcy court cannot affect the terms of your mortgage.  Therefore, beginning the month after you file for bankruptcy you will have to begin making your regular monthly mortgage payments. 

 

This can be difficult since you were already missing payments and now you are to begin making your mortgage payments again plus a payment to the bankruptcy court.  This will require some serious budgeting and discipline, but it will be very important for you to make both of these payments.  While there may be some ways to prevent foreclosure if you miss payments post-petition (i.e. after your bankruptcy has been filed), it will be difficult.  You will also have to maintain your homeowner’s insurance coverage.

To stop the foreclosure your bankruptcy will need to be filed prior to the foreclosure sale.  The 2005 amendments to the bankruptcy laws have made the preparation of bankruptcy petitions much more time consuming.  I would recommend you see a Joliet bankruptcy attorney immediately and not later than 1 week prior to the foreclosure sale.

The bottom line is while it may take some cutting back on other expenses, a Chapter 13 bankruptcy can save your house in Will County from foreclosure. Please contact Hamilton & Antonsen, Ltd. to find out more. They are located in the heart of Will County at 1256 West Jefferson Street #205. They can be reached via email or phone at 815.729.9220 or info@halawoffices.com

What If I Don't Reaffirm My Mortgage During Bankruptcy in Will County??

As much as it would be nice to believe that everything about your Will County, IL bankruptcy will be predictable, in fact, there are many areas where your treatment depends as much on the parties involved as the situation itself.

One such situation arises if you file Chapter 7 in Will County, IL but do not enter into a formal written reaffirmation with your mortgage company.  Reaffirmation, as you may know, is the process by which you renew your contractual obligations with your lender.  In the case of mortgage debt, if you do not reaffirm, in theory you will no longer have any personal liability with your mortgage lender.

 

Section 521(a)(2) of the Bankruptcy Code requires all Chapter 7 debtors to submit a statement of intention in which they assert their agreement to reaffirm or surrender secured property.  In theory, if you do not reaffirm your mortgage, Section 521(a)(6) provides that the automatic stay shall be lifted and that the creditor can foreclose on the property.

In reality, however, some debtors submit a statement of intention providing for surrender, but they continue to make payments and remain in the property.  In other cases, debtor submit a statement of intention providing for reaffirmation but they never execute the documents.  Often, there is no equity in the property and the mortgage lender would rather have the monthly payment than to foreclosure and add yet another home to their inventory of houses.  In yet another scenario, your budget may not support a reaffirmation because it does not show enough cash available to pay the mortgage and your attorney may advise you not to submit reaffirmation paperwork.

If you do not reaffirm your mortgage, you will have no personal liability to pay the debt, but the lender retains a lien interest on the property.  Because there is no personal liability, most lenders will not report timely payments as a positive on your credit reports.  Should you fall behind at some point in the future, or if property values were to rise unexpectedly, the mortgage lender would arguably be within its rights to initiate foreclosure proceedings months or years from the end of your bankruptcy.

The point here is that if you choose not to reaffirm your mortgage obligation, you need to discuss with your lawyer what such a decision means, both in the near term and in the long term.  Do not assume that "things will work out" because that does not always happen.  Proceed with a plan and understanding of your situation.

You can call Hamilton & Antonsen, Ltd. at 815.729.9220 to discuss your Joliet or Will County bankruptcy.  They are located at 1256 West Jefferson Street, Ste 205 and offer free consultations via email, phone, or in person.