Foreclosure is a scary word for homeowners. Many homeowners are not familiar with the process of foreclosure or how to to go about stopping one. It is important, as early as possible, to have an experienced foreclosure defense attorney let you know what your options are.
At Adam Diamond Law, we help McHenry and Lake County, Illinois homeowners through all of their real estate needs — including foreclosure defense. In this blog, we cover five ways to stop foreclosures.
Foreclosure in Illinois
A foreclosure occurs when a lender attempts to recover a home from the borrower after a missed payment (or payments). While not making monthly mortgage payments may seem like an unthinkable circumstance, this difficult situation is becoming more and more common due to the Covid- 19 pandemic.
But how can you keep foreclosure from happening to you?
1. Foreclosure Workout Agreement
A foreclosure workout agreement is a compromise that allows you to get back on track with your mortgage. Sometimes lenders are able to work out a compromise up until the time your home is scheduled for auction.
Here’s what these foreclosure workout compromises can look like:
- Repayment plans
- Reinstatement of loan
- Redemption (a process where you pay off the total loan amount)
- Forbearance (also known as a delay of the foreclosure)
- Loan modification
- Refinance (when you trade in your old loan for a new one)
2. A Short Sale
A short sale is when you sell a property for less than you owe. To do this, your lender (or lienholder) needs to approve the sale.
Some of the benefits of going through with a short sale may include:
- Avoiding some of the negative impacts of a foreclosure
- Doing less damage to your credit score
- Absolving you from some or all of your mortgage debt (deficiency)
3. Bankruptcy
Though this word may sound intimidating to most, it can protect you from collections when you are in a tight financial spot and seeking relief from debt.
Filing bankruptcy can temporarily stop or delay the foreclosure process but it does not necessarily make the foreclosure go away. The bankruptcy and the foreclosure are two completely separate court cases.
There are two main types of bankruptcy in Illinois:
- A Chapter 7 Bankruptcy can “discharge” or cancel your debts. This means you no longer owe them. To qualify, however, there are income limitations and you are only allowed to keep certain things.
- When you file for a Chapter 13 Bankruptcy, you agree to try to pay back some of your debts. The amount you need to pay is often based on what the court determines is your disposable income (commonly thought of as income left over after paying necessary living expenses) for 3-5 years.
4. Deed in Lieu of Foreclosure
A deed in lieu of foreclosure means you transfer the property title to the bank in exchange for a release from the mortgage obligation. When this process occurs, it means you don’t have to take responsibility for selling your home.
If you are exploring this option it is very important to have an attorney review the agreement before you sign it.
Contact your Illinois Real Estate Attorney Today
A deed in lieu of foreclosure means you transfer the property title to the bank in exchange for a release from the mortgage obligation. When this process occurs, it means you don’t have to take responsibility for selling your home.
If you are exploring this option it is very important to have an attorney review the agreement before you sign it.
