Using Bankruptcy to Avoid Illinois Foreclosure: Pros & Cons

 Posted on December 17, 2025 in Bankruptcy

Bankruptcy – especially Chapter 13 – can stop the process immediately. However, filing for bankruptcy without understanding the process and the risks may only delay the sale, not prevent it. The bankruptcy automatic stay is a powerful protection to immediately halt foreclosure and creditor calls, but it is not the right solution for everyone.

Your income, equity in your home, and the type of bankruptcy you choose to file can either give you a path to save your home or only delay the process. Illinois homeowners must understand the strict rules, long-term consequences, and what bankruptcy can and cannot do before committing to a course of action. A Kane County bankruptcy lawyer can evaluate your situation and help you make the best decision for your future.

Why is Bankruptcy a Common Foreclosure Strategy in Illinois?

Illinois is a judicial foreclosure state, which means lenders must file a lawsuit and get a court order to foreclose on a defaulted mortgage. This means that the process goes through the court system, giving homeowners more time to respond to the lawsuit and defend their case in court.

A judicial foreclosure can take many months, even years, while a non-judicial foreclosure can happen very quickly. The Illinois court process is slow, but strict once a sale is scheduled. Many homeowners look to bankruptcy to stop foreclosure sales, wage garnishments, collection lawsuits, and deficiency collection efforts.

How Chapter 13 Bankruptcy Can Save Your Home

Chapter 13 bankruptcy is generally the most effective choice for halting foreclosure. The Chapter 13 repayment plan allows repayment of the mortgage arrears over 3-5 years, and the homeowner must continue regular mortgage payments. A Chapter 13 bankruptcy filing can stop foreclosure, even if the sale is days away.

A Chapter 13 bankruptcy filing can also reduce or eliminate unsecured debt, freeing up income and allowing the homeowner to repay property taxes over time. Homeowners who were denied a loan modification can definitely benefit from Chapter 13. Chapter 13 bankruptcy does require a stable income for 3-5 years, and the monthly plan payment may be higher than expected. Missed plan payments can lead to dismissal and renewed foreclosure proceedings.

How Chapter 7 Bankruptcy Can Delay or Avoid Foreclosure

Chapter 7 bankruptcy does not save a home in the same way as Chapter 13, but the automatic stay can temporarily stop foreclosure. Chapter 7 bankruptcy could be a good option for homeowners who need more time to move and want to discharge mortgage-related debt. A homeowner who plans on walking away from the home but wants to avoid a deficiency judgment could benefit from Chapter 7.

The Chapter 7 process is quick, usually 4-6 months, and eliminates personal liability for mortgage debt. Since credit card and medical debt may be blocking a loan modification, Chapter 7 could clear the way for the modification. Chapter 7 does not provide a repayment plan, and unless the payments are brought current, the house will still be foreclosed on.

The Pros and Cons of Using Bankruptcy in General to Prevent Foreclosure

A bankruptcy filing can immediately stop foreclosure, give the homeowner time to catch up on arrears, and possibly eliminate a second mortgage or lien. Unsecured debt is eliminated, freeing up income that can go toward house payments. Homeowners who have been denied loan modifications can benefit from filing for bankruptcy.

On the negative side, bankruptcy remains on a credit report for years. Chapter 13 bankruptcy requires strict budgeting and discipline, and a missed payment can restart foreclosure. Chapter 7 bankruptcy only delays foreclosure but does not prevent it. If the equity of the home exceeds Illinois exemptions, the home could potentially be lost.  

Contact a Geneva, IL Foreclosure Lawyer

If you are facing foreclosure in Illinois, bankruptcy could offer the protection or fresh start you need. However, every case is different. An experienced Kane County, IL bankruptcy attorney from DLAW, PC can help you choose the best path for your circumstances. Attorney Walker becomes personally involved with each client as she helps them get their finances back on track. Call 331-222-7978 to schedule your free consultation.