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Chicago Bankruptcy Question: If my house was already sold, will Chapter 13 help me get it back?

Chicago Bankruptcy Question of the Day: If my house was already sold in a foreclosure, will filing for Chapter 13 bankruptcy help me get it back?  The short answer to this question is no it will not. 

In the Chicago area, foreclosure on a residential piece of real estate takes a minimum of seven months from date of filing until completion.  If no action is taken to stop the foreclosure, such as filing for Chapter 13 bankruptcy protection or engaging an attorney for a foreclosure defense action, then the foreclosure will end with an auction of the property, commonly referred to as a "sherriff's sale".  These days it is usually the mortgage company that actually purchases the property at the sale, where in better times there would be real estate investors bidding up the sale prices.  Any proceeds from the sale after the costs of the sale are applied to the mortgage balance, with any remaining balance still being legally due by the borrower on the mortgage (termed a "deficiency balance").

In order to stop this process, a Chapter 13 bankruptcy must be filed prior to the date of sale.  Upon filing for Chapter 13 protection, the federal bankruptcy court issues an injunction known as the automatic stay of bankruptcy that basically orders all creditors, including the mortgage company, to cease all collection efforts, including the foreclosure.  Upon filing, so long as the plan of reorganization is confirmed (approved) by the court and so long as the filer makes the required payments under the plan, the property remains protected.

Once the sale occurs, however, title to the property transfers to the purchaser at the sale.  Once title transfers, the borrower no longer has an ownership interest in the property to protect by filing for Chapter 13 bankruptcy, hence the bankruptcy filing does not effect the transfer of title and recover the home for the borrower.

If you are in foreclosure and approaching a sale date, Chapter 13 bankruptcy may well be the only realistic option you have to save your home.  You need to ensure that you are represented by and experienced Chicago Chapter 13 bankruptcy attorney in this process, as speed and accuracy in the filing are essential in these cases.  Filing one hour too late, failing to give proper notice to the mortgage company or selling agent or failing to address prior filings in these cases can cost a person their home.  The Chicago bankruptcy lawyers at Ledford & Wu have handled thousands of Chapter 13 filings, including many filed the day before or morning of a scheduled sherriff's sale, and kept people in their homes.  Call today for a free consultation today, as in these cases, time is truly of the essence.

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