Bankruptcy rules and Foreclosure Alternatives.
If you are interested in foreclosure alternatives, then you are probably having trouble making your mortgage payment, wondering how to avoid foreclosure.
You are probably not a bank wondering if there are ways to take a house other than by foreclosure.
Here are some positions for people wanting to avoid foreclosure:
1. Avoid foreclosure and keep the home
- Mortgage loan modification, the number one choice for people wanting to keep their home but having trouble with the amount of the payments. There are free services that help you to get a mortgage loan modification if you qualify for a mortgage loan modification.
In Illinois, the number to call to find an approved housing counseling agency, is 800-532-8785. This is the phone number of the Illinois Department of Professional and Financial Regulation. If you are not in Illinois, then try Making Home Affordable to find a free approved agency.
We charge $2,500.00 to do modifications for people, but we only do these for people who have been previously rejected in their application for a mortgage loan modification. This is because of a potential conflict that we have with the other services that we provide for people in foreclosure.
We prefer to refer people to the free services for their mortgage loan modifications, since we build our business on helping people become wealthy, not on charging them more than they need to pay.
- Reinstatement of the mortgage loan
If you can not qualify for a mortgage loan modification, then you will need to find a way to get more money. If you are successful at raising money, then you can "cure the default" with your mortgage loan. There is one most important date in the mortgage foreclosure process, and that is the date that you were served with the foreclosure case. In Illinois, you have 90 days after this service date, in order to cure your default and reinstate your mortgage loan, by paying the amount that you have fallen behind. This means that you must pay all of your late mortgage loan payments, plus all of the late fees, plus the attorney fees that have been charged, plus the court filing and service fees. Mortgage lenders are required to let you cure the default and reinstate your loan within the 90 day period after you get served with the Complaint and Summons in the foreclosure case, but usually banks will let you reinstate your mortgage even after the 90 days have passed. They usually will do this, but not always, since they are not required to let you cure your default after 90 days. They are also not required to do this repeatedly during the term of the loan. So if is not your first time falling behind with this loan, then don't rely on any right of reinstatement.
- Redemption means paying off the entire balance of the loan. If you are fortunate, you can raise enough money to do this and still keep your home.
Most people can only afford to pay off their mortgage upon the sale of their home. Your right of redemption can expire as soon as the reinstatement date, but is usually much longer, and can be extended for years in some cases. The basic right of redemption period in Illinois is seven months, measured from the date you were served with the foreclosure summons and complaint. There are circumstances which permit this date to be modified to longer or shorter periods, depending on the facts of your case. The right of redemption date is effectively the sheriff's sale date, since the sheriff's sale is usually conducted within a week or two following the expiration of the right of redemption. When we work with someone who is in foreclosure, we are usually working to extend the expiration date for the right of redemption, in order to give the homeowner the maximum time available to obtain their mortgage loan modification, or just to live for free before having to move to a new, more expensive home.
- Forbearance is where you have fallen behind by a significant amount, and the bank agrees to let you make payments over time for the amount that you have fallen behind, in addition to making your regular mortgage payment.
- Bankruptcy is an option for some people who want to keep their home, but not for nearly as many people as most bankruptcy attorney would have them believe. The most relevant bankruptcy types for people in foreclosure are chapter 7 and chapter 13. In order to understand chapter 13, you must first understand chapter 7. chapter 7 bankruptcy basically involves selling everything that you own, and using the money you raise to pay to the people who you owe money to. There are some things that you are allowed to keep however, and which vary from state to state. You can usually keep some of the value, or equity, in your home, plus some equity in your car or truck, plus your retirement accounts, plus a couple thousand dollars in cash. Bankruptcy lawyers can give you the exact list of these "exemptions" for your specific state and situation. Therefore, you sometimes don't need to sell any of your property in a chapter 7 bankruptcy. If your property is not very valuable, of if you owe more than it is worth, then you can keep it in a chapter 7 bankruptcy, and still eliminate your debts. Money that you owe against your property however is not eliminated. You can elect to no longer be personally liable for such debts, but then the lender can have the property sold in order to get its moan repaid. If you have a lot of equity in something like a car or a home, then you will need to sell that car or home in order to pay your creditors. Once everything has been completed in a chapter 7 case, you get a "discharge," which means that your debts are gone, and you now have a very bad mark on your credit report for the next ten years.
Chapter 13 is like chapter 7 except that if you have a lot of equity in a piece of property, such as a car or home, then you do not need to sell that property in order to pay your creditors. Instead, you can agree to keep the property, and pay the amount of your equity over time to your creditors. You do this by preparing a plan for the repayment. You present your repayment plan to the court for approval, or "confirmation." Instead of a "discharge," you get a "confirmation" of your plan in a chapter 13 case. Usually this means that you make your plan payments for three or four years. Everything I told you about bankruptcy varies, since there are thousands of pages of bankruptcy laws, consisting of cases and statutes and rules. Chapter 7 bankruptcy absolutely does not save your house from a foreclosing mortgage lender. Chapter 7 bankruptcy eliminates your other debts, provided that your home is worth less than what you owe on your mortgage loan. But chapter 7 only stops the phone calls and letters related to your foreclosure temporarily, sometimes for not much more than one month. Chapter 7, if filed early in your foreclosure case, does not prevent or delay the loss of your home.
Chapter 13 can help a limited group of people. That group consists of people who have been denied a modification, and who can afford the amount of their original mortgage payment plus an additional few hundred dollars a month, and who have fallen behind in their mortgage loan payments by a significant amount, usually tens of thousands of dollars. in such cases, where the bank has refused to accept modification, and has also refused forbearance (payment over time of the arrearage), the chapter 13 plan can be used in some cases to order the mortgage lender to accept payments over time for the arrearage. you need to check with your bankruptcy attorney to see if this is available in your specific situation and location.
2. Avoid Foreclosure and Protect My Credit
- Short sale If you are behind in your payments, then you already have bad marks on your credit. You can minimize these by avoiding the foreclosure judgment and sheriff's sale, and instead by selling the house. We have a page devoted to explaining short sales.
- Deed in lieu of foreclosure This means that instead of losing the house in foreclosure, you give the house to the bank. in return, the bank releases you from your obligation on the mortgage loan. A deed in lieu of foreclosure is beneficial in some situations, for example if you have been transferred out of the area with your employment, and the home is worth less than what you owe. You need to leave the home, and therefore have no interest in fighting or delaying the foreclosure process, and all you want is a release from the mortgage debt obligation. Banks will sometimes insist that before they will accept a deed in lieu of foreclosure, the home needs to be listed for sale for at least 90 days. This is so that the bank can get their money from a potential buyer immediately, rather than needing to wait while the bank goes through the process of finding a buyer on its own.
3. Avoid Foreclosure and Make Me Wealthy
- Be disciplined
If we get money for you, build on it rather than spending it right away. We have gotten money for people in foreclosure, while their case is pending, only to find that they have spent all of it on European or Asian vacations, new cars, furniture and electronics, or just relaxing and doing nothing while utility bills and living expenses eat away at the money.
- Fight the foreclosure case
In Illinois, we have found new ways to help you fight your foreclosure case inexpensively. Once you have been served with a foreclosure case, you have 30 days in which to file your answer and appearance. Having these documents prepared properly can extend your redemption date. Some of our foreclosure cases have been dropped by the mortgage lenders. Others have lasted for years. The owners did not make mortgage payments during these periods, but lived in the homes, or rented them out.
- Short sale
Again, we have a separate page for short sales. If you are interested in getting wealthy, rather than keeping this home no matter what it costs, then the short sale process, the way that we use it, can give you many months of free living in your home. Mortgage lenders are free to approve a short sale quickly, and some of them do this. But many mortgage lenders take more than six months to approve a short sale, during which time you have the complementary use of the home, before losing it.