Chicago Bankruptcy Lawyer Blog

Homeowners shouldn't be surprised if they find a foreclosure notice in the mail after defaulting on their mortgage payments. But what if the bank began foreclosure proceedings for a loan you knew was already paid off?

More and more frequently, Chicago bankruptcy lawyers are seeing ghost mortgages coming back to haunt borrowers.

In a recent Reuters article, a Kansas couple refinanced their home to take advantage of lower rates. But while Wells Fargo said the original loan would be paid off in the refinance, it was never recorded in the paperwork.

As a result, the family was thrown into foreclosure - despite the fact that they had never made a late payment.

Experts attribute the problem to sloppy paperwork during the housing boom, when lenders attempted to sell as many loans as possible so they could resell to millions of investors. Now banks are using the same sloppy tactics to foreclose on as many homes as possible with reckless speed.

Some of the borrowers being pushed into foreclosure were never in default; others never even had a mortgage. Often times, a computerized banking error is the source of the mix-up.

It's a good reminder of why it's so important to keep tabs on the state of your credit. Banks report any late or missing payments - whether valid or not - to credit bureaus, who in turn record the discrepancies in your credit report. Having a credit score tarnished by a delinquent mortgage or a foreclosure you didn't know about can keep you from getting future loans or lower interest rates.

Of course, the majority of folks facing foreclosure are still those who have missed one or more payments, usually because of job loss or overwhelming credit card debt.

Regardless of how you've gotten into a mess with the bank, filing for bankruptcy in Chicago is often the best way out.

Chapter 13 bankruptcy has the power to stop foreclosure proceedings from the moment you file, so you can protect your house and stop the bleeding on your credit report.

Whether you're unfairly caught up in a foreclosure or are losing your house because you couldn't afford to make payments, the effects can ruin credit, put you at risk for costly lawsuits, and, of course, threaten to snatch the roof from over your head.

Bankruptcy can put a fast stop to foreclosure, so you can start rebuilding your finances, you credit, and your life.

Continue reading "Chicago Bankruptcy May Help Homeowners Haunted by Old Mortgages" »

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" »

A recent Wall Street Journal article looks at deficiency judgments, which are court orders that banks can get to force homeowners to pay the difference between what the home sells for and what remains owed on the loan.

This is a terrifying prospect. A homeowner loses his or her job and is forced to stop making payments on a home they want to keep. The bank is unwilling to modify their mortgage, so they're stuck.

Without notice, some months later, they get a phone call or a letter. It's the bank telling them a judge signed off on a deficiency judgment against them. This is after the bank took back their house, sold it at auction for significantly less that what was owed, and now wants the difference in the loan paid to them.

This is happening with great frequency as banks are unable to cope with the losses from home loans gone bad nationwide. There are millions of homes in foreclosure and the losses for banks are staggering. But there is a solution -- bankruptcy in Chicago.

Under certain forms of bankruptcy, there are ways for people to hang on to their main house even if a vacation house is in foreclosure or has already been sold by the bank. Chapter 13 bankruptcy allows for people to make payments over a three to five year period in order to discharge all the money they owe. Other forms of bankruptcy allow all the debt to be removed without making payments.

Consult with an experienced Chicago bankruptcy lawyer if you find yourself in this position. Getting out of debt can be a monumental challenge and it's one that can't be tackled alone.

As lawyers have noted, banks have become more and more aggressive in seeking deficiency judgments. Rather than working with homeowners or cutting them some slack because of tough financial times, the number of deficiency judgments has actually spiked this year as foreclosures have increased. With real estate numbers slow to improve, analysts say it's likely that this strategy will continue to play out for banks who are seeking to get back as much money as they can after the market's collapse.

There are 40 states and the District of Columbia that allow lenders to sue borrowers for mortgage debt lingering after a foreclosure sale. Experts believe banks will use these laws to their advantage as their own companies continue to struggle financially with the rise of foreclosures nationwide. Most banks won't say why they choose to seek deficiency judgments against borrowers, but some say they do it when they suspect borrowers have stopped paying because of a loss of value, not because they can't afford payments.

But one strategy for these borrowers is to consider bankruptcy. If a consumer gets hit with a deficiency judgment, they can file for bankruptcy, which stops lenders from coming after them for that debt. By discharging that debt, the borrower can get away from a six-figure judgment hanging over their head.

Continue reading "Homes Can Be Foreclosed, But Banks Can Come After You For Difference Without Chicago Bankruptcy" »

A project story by The Associated Press revealed that officials nationwide have found that "robo-signed" documents, which are signed by mortgage servicers without checking the paperwork first for accuracy, are still popping up in foreclosure cases throughout the country, despite ongoing investigations in every state.

Chicago Bankruptcy Lawyers have seen many people put their hopes of saving their home in the idea that there may be a problem with the documentation regarding their home paperwork. And considering all 50 states have ongoing investigations into "robo-signing," fraudulent mortgage sevicers, bank attorneys and bank officials, it's not a shock. But the only fool-proof way of stopping a Chicago foreclosure is by filing for bankruptcy.

While this may not be a solution for everyone, filing for Chapter 13 bankruptcy in Chicago and elsewhere immediately halts the foreclosure process and stops creditors from calling.

The purpose is to allow the homeowner to set up a payment plan, usually over three to five years, to pay off debt and stay in their home. Whether you have just been given notice by the bank that you're in default or your house is scheduled to be auctioned off on the courthouse steps tomorrow, a bankruptcy will stop foreclosure.

According to The Associated Press story, officials in at least three states have discovered thousands of "robo-signed" documents since last fall, suggesting that it is still a widespread problem in the industry. Illinois' Attorney General, along with all 49 other attorneys general, have been investigating financial institutions' use of companies that have signed documents and filed them with courts that aren't accurate but have been rubber-stamped as accurate by other companies the banks hire.

Last fall, the nation's largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork. Many experts believe a big second wave is coming once banks get their paperwork in order.

Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles, the story states. And they say it shows that banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

While all these problems plaguing the mortgage foreclosure industry may be positive for people trying to stay in their homes, it may not stop a foreclosure. Documents can be corrected, especially when a foreclosure action is brewing. So, if you are banking on bad documents in your mortgage to save your house, you should be consulting with an attorney familiar with foreclosure and bankruptcy in Chicago.

Filing for bankruptcy will immediately stop foreclosure and allow you to work through your debt. Medical bills, job loss and credit card debt are the three top reasons for a bankruptcy and many Chicagoans are facing these challenges today.

Continue reading "Fraudulent, "Robo-Signed" Documents Still Prevalent in Chicago Foreclosure Filings" »

As The New York Times recently reported, the country's most powerful banks aren't trying to fix the problems with robo-signing and shady business practices in foreclosure cases by actually fixing them, but instead by trying to pay off the government.

Chicago Foreclosure Attorneys have watched as the country's financial crisis started in the mid 1990s, but didn't rear its ugly head until recent years, when the housing market collapsed. Home prices steadily increased in from 1995 to 2001 and as they did, lenders relaxed their standards and let people borrow against their home's value. But when values plummeted as the bubble burst, millions of homes lost value, leaving even honest homeowners in Illinois upside down in their mortgages.

But it is possible to stop foreclosure in Chicago. Consulting with an experienced foreclosure attorney in Chicago can make the difference between dealing with unmanageable debt and enjoying the freedom of taking control of your finances.

As the story details, the banks controlling about two-thirds of the mortgages in the United States have offered to pay $5 billion to settle allegations of robo-signing and other shady practices like filing false documents in foreclosure cases. But the state attorneys general who have launched investigations are seeking $20 billion in payments.

The Wall Street Journal recently reported that the banks are trying to haggle over how much to pay for their abuses. After the banks offered $5 billion, the states came back with an offer of $17 billion. The states believe the banks will face a liability of at least $17 billion in civil lawsuits.

The U.S. Trustee Program, a part of the Justice Department that oversees bankruptcy cases, has asked for an additional $500 million to $1 billion in penalties, according to people familiar with the matter. Officials of the unit have raised questions in several cases over the authenticity of foreclosure documents.

All this can be good news for homeowners who are struggling to pay off their loan on an upside down mortgage. All of these problems can potentially be helpful in defense of a foreclosure. While that may be a successful plan of attack for homeowners, one surefire way to stop foreclosure in its tracks is through Chapter 13 bankruptcy in Chicago.

The way Chapter 13 differs from Chapter 7 is that it works for people who have assets they want to protect, such as houses. Chapter 13 filings immediately stop the foreclosure process and work to help the homeowner come up with a payment plan to help keep their home and other assets. The payment plan typically lasts 3 to 5 years.

In other cases, Chapter 7 Bankruptcy may be your best bet. In either case, fighting bankruptcy can permit you to remain in your home indefinitely while you work to restore solid financial footing.

Continue reading "Questionable Foreclosure Practices in Chicago put Banks on the Hotseat" »

We exercise. We visit the doctor regularly. We eat healthy -- all to preserve our physical health. But taking care of your financial health is every bit as important.

The estimated credit card debt in the United States is nearly $15,000, according to Credit Cards.com. Many blame the recession, the deteriorating housing market and other financial obligations for the increased levels of bad debt in Chicago and elsewhere.

It's evident that many residents are currently struggling with insurmountable debt, including credit card debt, mortgage debt and medical bills. Many times, by the time bankruptcy becomes a consideration, your credit score has already been ruined. Consulting a Chapter 7 bankruptcy lawyer in Chicago can help you start fresh and begin rebuilding a solid credit rating.

In March alone, nearly 145,000 people filed consumer bankruptcy petitions. This number is a 41 percent increase from the near 102,000 filings in February, according to Reuters.

As a result, potential homeowners are finding it difficult to obtain loans.

"Right now, in this economy, credit is essential to getting a mortgage. There are different kinds of mortgages, but credit is a huge factor, along with the value of the property and your income," says Tracy Becker, author of the Credit Solutions Kit and founder of credit restoration company North Shore Advisory.

For those dealing with insurmountable debt, or who are significantly upside down on their home or months behind in payments, consulting with a bankruptcy attorney could be their best course of action. For others, credit score rehabilitation may still be possible short of bankruptcy.

For those who may be looking for a loan to purchase a new house, condo or apartment, it is advised you follow these simple steps:

-Establish a credit history. You need credit to get credit. Those who are new to the credit game may not satisfy a lender as they possess zero record of financial credibility. Most lenders will require that you have a credit history of at least a year prior to applying, or getting approved, for a loan.

-Know your front- and back-end debt. Lenders are interested in how you plan to deal with front-end debt. Front-end debt includes interest, taxes, insurance, loan principle. Lenders require that you show that roughly 30 percent of your gross income can go towards paying off your front-end debt.

-Try to boost your credit score. Ask if a family member or spouse will add your name as an authorized user. This can help boost your score by as much as 60 points.

Continue reading "Those Considering Bankruptcy in Chicago already have Credit Score Blues; New Beginning a Sigh of Relief" »

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?" »

There's a new plan to help restructure the mortgages of underwater borrowers. The only catch? It won't work for everyone, say Chicago bankruptcy attorneys.

So far, more than 20 lenders have jumped on board the FHA-backed Short Refi program, which aims to help homeowners by getting lenders to write off 10 percent or more of their principal balance. Borrowers are considered eligible if they are regularly making mortgage payments and do not yet hold an FHA loan. Sounds good, right? Here's where it gets sticky. See, Fannie Mae and Freddie Mac loans don't qualify.

Continue reading "How Bankruptcy Can Pick Up Where New Loan Modification Program Leaves Off" »

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" »