Chicago Bankruptcy Lawyer Blog

Strategic default - in which a homeowner simply walks away from a mortgage - is on the rise.

In a Chicago area survey last year, 30 percent of homeowners who defaulted on their home loan were able to afford payments but chose to walk away.

Usually borrowers choose to walk because they owe more on their house than the house itself is worth. With real estate prices in Chicago continuing to fall, homeowners are realizing they won't recover value anytime soon and some are getting out now in order to save money.

But defaulting on a mortgage is not without consequences. Walking away damages credit, decreases your chances of qualifying for future loans, and comes with the risk of being pursued in court by lenders. Maybe most significantly, though, defaulting on your mortgage does nothing to lower your debts.

By filing for a Chicago bankruptcy, homeowners can keep a roof over their heads while freeing up more money for the mortgage each month.

Part of the problem is the mortgage system, according to a recent MSNBC.com article. In the past, people knew who owned their mortgage. In many cases, they received their loan from the teller at the local bank. Today, people are approved for loans online, then those loans are split up and sold off to faceless investors. Homeowners who try to get a loan modification often have difficulty determining who actually owns their loan. The incentive to follow through on payments just isn't the same as it used to be.

But while it may be easy for homeowners to walk away, dealing with the aftermath is not so simple. Any time you default on a loan, your credit score takes a serious hit. Keep in mind that your credit score affects your ability to rent a home or apartment and to qualify for affordable rates on future loans.

Then there's the risk of being pursued in court by lenders seeking a "deficiency judgment" - a court-ordered repayment of the mortgage in full. While homeowners often have an "it won't happen to me" attitude, lenders are stepping up their aggression in punishing those who default.

If you're considering walking away from your mortgage, do yourself a favor and speak with a legal professional before you make any rash decisions. What seems good for the short term may hurt you in the long term.

In exploring your options, you may find an alternative solution. Chapter 7 bankruptcy has the ability to discharge debt, providing a clean financial slate.

Those who don't qualify for Chapter 7 may benefit from Chapter 13 bankruptcy, in which debt is restructured to make payments more affordable. While lenders don't care whether you can stay in your house, bankruptcy was designed specifically to help homeowners.

Continue reading "Chicago Bankruptcy Can Help Homebuyers Considering Walking Away From a Mortgage" »

The New York Times reports that as the Great Recession ravaged the country's housing market, the percentage of homeowners dropped sharply from 69.2 percent in 2004 to 66.4 percent now. Experts say the levels are akin to where they were in 1998 and could decline to levels seen in the 1980s or earlier.

What this tells Chicago Bankruptcy Attorneys is that while millions of people have used bankruptcy laws to their advantage, there are millions still who have not -- despite faced with losing their homes. Home prices dropped again recently -- 4.2 percent in the first quarter, according to the S&P/Case-Shiller National Index -- illustrating that the housing market woes may continue for some time.

Housing is locked into a downward spiral, analysts say, because people are unemployed, in foreclosure or trapped in homes that are worth less than the mortgage. But another factor is that the disappointment in the housing market collapse has caused many people not to want to own. Still, with it being the cornerstone of the American Dream, real estate experts believe that people will soon go back to the mentality of wanting their own house.

There are many people throughout Chicago who fall into one of the categories outlined in The New York Times. Many people are trapped upside down in their mortgages and are struggling to find a way out. Many hope their loans can be modified to reflect the current value of their property, but their bank is unwilling to help.

Many people are stuck in a frustrating position because of the housing market collapse. But, while they may have just started missing payments on their house or because of unemployment are months behind, Chapter 13 bankruptcy in Chicago may be the right choice.

According to March statistics by the United States Bankruptcy Court, nationwide Chapter 13 filings rose 5 percent to 438,788 from the 415,966 bankruptcies filed in the 12-month period ending March 31, 2010. The number of Chapter 13 filings came in second only to Chapter 7 filings.

Chapter 13 bankruptcy allows homeowners to potentially keep their homes and other large assets, by working out a payment plan over a 3- to 5-year window to satisfy their debts. Filing for Chapter 13 bankruptcy automatically halts any foreclosure process that a homeowner may be going through, so it gives instant protection. And throughout the bankruptcy process, homeowners are able to stay in their houses.

Many people still think that bankruptcy is embarrassing and hurts a person's reputation. Consider this: Donald Trump has filed for bankruptcy four times! Many people use the bankruptcy laws to their advantage because it's one set of laws that are designed with the everyday person in mind. They are designed to allow people a second chance and the opportunity to get their finances in order.

Continue reading "American Dream of Home Ownership a Challenge in Chicago" »

Less than 10 years ago lenders were handing out mortgages like there was no tomorrow. This spring, it's a different story, say Chicago bankruptcy attorneys.

Just one-third of borrowers who apply for a mortgage in coming months will qualify, according to Wallet Pop. After being burned by a record number of defaults and with a glut of foreclosed homes on their hands, banks are not surprisingly older, wiser and a whole lot stricter. So what does a home buyer need to do to fall into that magic 33.3 percent?

Continue reading "How Chicago Homebuyers Can Increase Chances of Getting a Mortgage" »

Remember last decade's adjustable-rate mortgages? You know, the subprime loans that led to millions of mortgage defaults across the country - and pretty much launched the whole recession? Well, they're back.

But this time around, lenders say they're different - and depending on your financial situation, they may be able to help you afford a home. In the past, ARMs came with risky gimmicks, like rates that adjusted every six months (seriously, how can you keep up with that?) and an option that allowed people to put off paying interest - leading to a huge bill later down the line.

Today's ARMs are far more conservative, explain Chicago bankruptcy attorneys.

Continue reading "Should Chicago Homebuyers Opt For New Adjustable Rate Mortgages?" »

You might have fought hard to afford your mortgage payments - but most homeowners assume the battle is over when the foreclosure notice comes in the mail.

Not true, say Chicago bankruptcy attorneys. Sure, being this close to losing your house is not a good position to be in. But you do have one more shot to fix your financial situation and keep your home. Bankruptcy has the power to stop foreclosure while you and the court work out a payment plan with lenders. Many folks aren't aware that bankruptcy is an option - or they mistakenly worry it will wreck their credit. In reality, it can do just the opposite, according to MSNBC.com.

Continue reading "Chicago Homeowners Can Stop Foreclosure With Bankruptcy" »

Thinking about getting a little help from Uncle Sam for that mortgage or refinance? It might cost more than you think, say Chicago bankruptcy attorneys.

This month the Federal Housing Administration announced it will raise premiums for its popular government loans by a quarter of a percentage point. It's a tiny increase, for sure, but for folks toeing the line between being able or unable to afford a loan, it could have big consequences.

Continue reading "Chicago Borrowers To Pay Higher Premiums For FHA Loans" »

Everyone wants to know if bankruptcy will leave a black mark on their credit score. Yet few seem to consider the credit consequences of foreclosure.

This month we talked about bankruptcy's impact on credit - initially, filing can drop your score by a one or two hundred points. Of course, as your debt disappears, you have can begin improving your score - often to a whole new high. As Chicago bankruptcy attorneys point out, many clients qualify for credit cards or loans right after filing.

Foreclosure, on the other hand, is a whole other ball game. Let's take a look at what happens when you fail to make those mortgage payments.

Continue reading "How Foreclosure Affects Chicago Homeowners' Credit Scores" »

It looks like troubled homeowners may soon have a better option for modifying home loans, according to Chicago bankruptcy attorneys.

A new bill backed by Sen. Sheldon Whitehouse suggests that the federal government consider allowing bankruptcy to be used to modify the mortgages of the millions of Americans at risk for foreclosure. Currently, the best aid Uncle Sam has mustered is the failing Home Affordable Modification Plan, which has barely assisted 500,000 of the four million homes it set out to save. Clearly, homeowners need a better solution.

Continue reading "Could Bankruptcy Help Struggling Homeowners Avoid Foreclosure?" »

Two foreclosures in Massachusetts could have a big impact on banks - and homeowners - nationwide, say Chicago bankruptcy attorneys.

Last week a Massachusetts court voided the foreclosure of two homes, citing the fact that Wells Fargo and U.S. Bancorp could not prove they held the mortgages at the time they seized the residences. Last year, two other banking giants, Bank of America and JP Morgan Chase & Co., briefly stopped foreclosures because of similar documentation problems. If lawmakers get their way, banks are going to have to be a lot more careful about foreclosing on properties - and consumers may get better protection.

But homeowners facing foreclosure shouldn't breathe a sigh of relief just yet.

Continue reading "How Foreclosure Ruling Could Affect Chicago Homeowners" »

Looking to lower your mortgage payment? You might have more choices than you think, say Chicago bankruptcy attorneys.

Traditionally most homeowners have lowered their house payments by refinancing, which can result in a new, lower interest rate and therefore a lower payment. Problem is, the refinancing process takes time and costs money - if you even qualify in the first place, that is. Thanks to ever-tightening credit requirements, many homeowners don't meet the criteria for a refinance. Fortunately, there are other ways to save money on your mortgage.

Continue reading "Ways Chicago Homeowners Can Cut Their Mortgage Payment Without A Refinance" »

It looks like even mortgage companies are feeling the holiday spirit this time of year.

Freddie Mac recently announced plans to stop foreclosures from Dec. 20 to Jan. 3 - long enough for folks to stay in their homes during the Christmas season. Fannie Mae has pledged to halt evictions as well. With millions of Americans behind on mortgage payments this time of year, it's a nice gesture. Unfortunately, point out Chicago bankruptcy attorneys, it's also only putting off the inevitable.

Continue reading "Mortgage Companies Temporarily Suspend Chicago Foreclosures" »

Move over Black Friday. Small Business Saturday is here. And the timing couldn't be better.

American Express is hoping to encourage shoppers to spend locally this season, starting today. In fact, the credit issuer is offering $25 in spending credit to the first 200,000 people who register American Express cards today on the Small Business Saturday website, according to Chicago bankruptcy attorneys. But before you write the whole thing off as an expensive marketing campaign, think about this - it makes financial sense.

Continue reading "Small Business Saturday's Strategy Is Good for the Economy and Chicago Shoppers" »

Some Chicago homeowners will have a lot more to give thanks for than the food on their Thanksgiving table, according to recent foreclosure statistics.

Delinquency rates on house payments recently fell to their lowest point nationwide since the beginning of last year. Experts are pointing to a couple of reasons. First the good news: between the economy improving and more people saving, the number of borrowers missing their first mortgage payment has dropped. Now, the not so good news: when it comes to homeowners that are seriously delinquent (i.e., have missed three or more payments in a row) banks are either modifying mortgages or kicking homeowners out of their homes - both of which show up in the data as fewer delinquencies.

Continue reading "Mortgage Delinquency Rates Fall Slightly for Chicago and Nationwide Homeowners" »

Paying taxes is tough enough as it is. But now popular tax credits could disappear thanks to Uncle Sam's overspending.

According to MSNBC.com, there's a federal commission currently looking at ways to lower the government deficit - including doing away with breaks like the child tax credit or mortgage interest deduction. Eliminating those credits could save $1 trillion annually, but would be a slap in the face to taxpayers already struggling to afford the mortgage and put food on the table, say Chicago bankruptcy attorneys.

Continue reading "Government Debt Could Mean Disappearing Tax Breaks for Struggling Chicago Residents" »

Something scary is on its way to your door, and I'm not talking about trick-or-treaters.

It's property tax season. And if it isn't bad enough that many of us have to pay a property tax bill on top of credit card bills and an expensive mortgage, it looks like that tax bill might be unfairly overpriced. As much as 60 percent of properties in the U.S. may be overtaxed, according to the National Taxpayers Union. Fortunately, there may be a way to lower your tax obligation, say Chicago bankruptcy attorneys.

Continue reading "Chicago Homeowners May Be Able to Lower Property Tax Bill" »