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10 February 2022 / Monette W. Cope

Maneuvering Chicago's New Chapter 13 Mortgage Modification Mediation Program

Topics: Bankruptcy

The Bankruptcy Court for the Northern District of Illinois, which oversees Chicago and its suburbs, formally adopted a mortgage mediation program in December of 2021. Unlike some jurisdictions, this program is entirely voluntary – both the lender and the debtor must agree to participate. The goal is to help debtors that cannot afford their current mortgage payments get affordable payments to keep them in their homes. 

Only mortgages on a debtor’s principal residence are eligible. Mortgages on second homes, investment properties, and business properties are not eligible. The debtor must be in chapter 13 and have a steady income.  

There is a portal to the program on the court’s website. Fees are charged for portal access and document preparation, but the court provides sample form documents that the parties may use and adopt as their own. A mediation fee of $600 is split evenly between the debtor and the lender. The debtor’s attorneys are also entitled to additional “no-look” fees for completing various stages of the mediation.

The debtor’s attorney initiates the program through the portal, files an initial Notice of Intent to Participate in Mortgage Modification Mediation, and serves it on the lender. A Certificate of Readiness to mediate must also be filed by the debtor. 

If the lender agrees to participate, the parties should move to have an Agreed Order for Loan Modification Mediation entered.

Then, the parties negotiate the modification and can use the portal to assist and communicate. If a modification is reached, there is a joint Notice of Loan Modification that can be filed with the court. This is useful for both parties and the court because it includes information that the court looks for in loan modifications, but is often excluded from debtor’s motions for modification of their loans. 

If the mediation does not result in a loan modification, either party should file a Notice of Termination of Loan Modification Mediation.

The parties do not have to use the court’s portal to negotiate mortgage modifications, but the forms and format provided help both parties focus on milestones in modification attempts and on keeping the court informed of their progress.  

Loan modification can result in a win for both parties by keeping debtors in their homes and providing the lender with regular payments on the loan. Our team is constantly monitoring this new program. If you have any questions, please connect with Monette Cope at any time.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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Monette W. Cope

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