Stop Foreclosure in Illinois with a Chapter 13 Wage Earner Plan

How Chapter 13 Can Help You Save Your Home

Chapter 13 is designed for individuals with regular income who need time to catch up on missed mortgage payments. When you file, the automatic stay under 11 U.S.C. § 362 generally stops most foreclosure activity. You then propose a repayment plan to cure mortgage arrears over time under 11 U.S.C. § 1322(b)(5) while continuing your regular mortgage payments going forward. If the plan is confirmed and you make the required payments, you can resolve the default and keep your home.

The Automatic Stay: Hitting Pause on Foreclosure

Filing a Chapter 13 petition triggers an automatic stay that typically halts foreclosure lawsuits, scheduled sales, wage garnishments, and collection calls. See 11 U.S.C. § 362. Important limitations apply:

• If you had a bankruptcy case dismissed within the past year, the stay may expire after 30 days unless extended by court order; with two or more dismissals in the past year, no stay goes into effect unless the court imposes one. See § 362(c)(3)-(4).
• A lender can ask the court to lift the stay if you cannot make ongoing payments or the plan is not feasible. See § 362(d).
• If a foreclosure sale has already been completed under Illinois law before you file, the stay does not unwind that completed sale. And once a residence is sold at a foreclosure sale conducted in accordance with state law, the right to cure in Chapter 13 ends. See § 1322(c)(1).

Because timing can be outcome-determinative, speak with counsel promptly if a sale date is approaching.

Curing Arrears Through a Court-Approved Plan

Your Chapter 13 plan proposes to repay past-due mortgage amounts (arrears), plus any approved fees and costs, over a set plan period while you maintain ongoing monthly mortgage payments. This cure-and-maintain approach is authorized by 11 U.S.C. § 1322(b)(5). In many Illinois cases, the trustee distributes arrears to the lender, and you pay your regular mortgage directly (or through the trustee, depending on local practice). Falling behind on either plan payments or new mortgage payments can lead to motions for relief from stay or case dismissal.

Illinois Foreclosure Basics You Should Know

Illinois uses judicial foreclosure, meaning lenders file a lawsuit in circuit court to foreclose. See the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1101 et seq. Borrowers are served, can respond, and the court enters judgment if the lender proves its case. After judgment, a foreclosure sale is scheduled, followed by court approval (confirmation) of the sale pursuant to statute. Illinois law provides specific notices and procedures, and homeowners may have opportunities to reinstate or redeem under certain circumstances. Because procedures and timelines can vary by county and case, get tailored legal advice promptly if you receive a summons or sale notice.

Stopping a Scheduled Sale

If a foreclosure sale is scheduled, filing a Chapter 13 case before the sale generally stops it due to the automatic stay. However, your ability to cure a residential mortgage default in Chapter 13 ends once the residence is sold at a foreclosure sale conducted in accordance with state law. See 11 U.S.C. § 1322(c)(1). If you had a recent prior bankruptcy, the stay may be limited or may require a prompt motion to extend or impose it under § 362(c)(3)-(4). Lenders can also seek relief from the stay if you cannot demonstrate plan feasibility or miss post-filing payments.

What a Typical Chapter 13 Plan Includes

• Identification of secured debts (including your mortgage) and how arrears will be cured.
• Treatment of priority debts like recent taxes or domestic support obligations.
• Treatment of unsecured debts based on your disposable income and applicable tests.
• Feasibility based on stable income and reasonable expenses.

Many Illinois courts use model plan forms. For example, see the Northern District of Illinois Chapter 13 Model Plan.

Eligibility and Debt Limits

Chapter 13 is available to individuals with regular income who meet applicable federal debt limits and can fund a feasible plan. If your debts exceed current thresholds or your income cannot support plan payments plus ongoing mortgage payments, your attorney can discuss alternatives. Debt limits are set by federal law and may change, so obtain up-to-date guidance.

Keeping Up with Mortgage Payments After Filing

You must resume or continue regular mortgage payments that come due after filing while also paying the arrears through the plan. Missing new payments can lead to motions for relief from stay. Many homeowners use automatic payments and trustee wage deductions to stay current.

HOA/Condo, Taxes, and Insurance

Post-filing homeowners’ association or condominium assessments typically must be kept current. Maintain property taxes and homeowner’s insurance to protect your home and avoid force-placed insurance or extra charges. Your plan can address past-due taxes and certain liens where appropriate.

Second Mortgages and Lien Stripping

In some Chapter 13 cases, if your home’s value is less than the balance of your first mortgage, a wholly unsecured junior mortgage may be treated as unsecured and its lien removed upon completion of the plan, subject to evidence of value and court approval. This is fact-specific and not available if any part of the junior lien is secured by equity in the residence.

Credit Impact and Fresh Start Considerations

Chapter 13 will affect your credit. But creating a structured path to resolve arrears and bring accounts current over time can support long-term financial stability.

Checklist: Documents to Bring to Your Attorney

• Foreclosure papers and any sale notices.
• Recent mortgage statements and escrow analyses.
• Proof of income (pay stubs, benefits, business income).
• Last two years of tax returns.
• Homeowner’s insurance declarations page.
• HOA/condo statements.
• A list of all debts and monthly expenses.

FAQ

Will Chapter 13 stop my foreclosure immediately?

In most first-time filings, the automatic stay goes into effect upon filing and stops the foreclosure process, including a scheduled sale, provided the sale has not already been completed under Illinois law.

How long do I have to repay my mortgage arrears?

Most plans run 36 to 60 months. The plan proposes to cure arrears within that period while you maintain new payments.

What if I filed a bankruptcy case in the last year?

The stay may be limited to 30 days or may not go into effect without a court order. Your attorney can file a motion to extend or impose the stay with supporting evidence.

Can I include property taxes or HOA arrears?

Yes, past-due taxes and HOA/condo arrears are commonly addressed in the plan, but you must keep new assessments and taxes current after filing.

What happens if I miss plan or mortgage payments?

The lender may seek relief from the stay or the trustee may move to dismiss the case. Contact your attorney immediately to explore fixes.

Next Steps

If you’re behind on your mortgage or received a summons or sale notice in Cook, DuPage, Lake, Will, or any Illinois county, speak with an Illinois bankruptcy and foreclosure defense attorney promptly. Early advice can preserve options and help you time any filing strategically. To discuss your situation, contact our team.

Sources

• 11 U.S.C. § 362 (Automatic stay)
• 11 U.S.C. § 1322 (including (b)(5) cure of defaults and (c)(1) cure cutoff after foreclosure sale)
• Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1101 et seq.
• Northern District of Illinois Chapter 13 Model Plan (Official Form 113 adaptation)

Disclaimer (Illinois): This blog is for general informational purposes only and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and results depend on specific facts. Consult a licensed Illinois attorney about your situation.