Thursday, October 16, 2014

Post-Foreclosure “Hell” for Many Americans

The housing crisis is over, and many Chicago residents are hard at work to rebuild their finances after foreclosure.  However, according to a recent article in Reuters that cites the Emerson Law Firm’s Sandra Emerson, these Americans “are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages, and seizing their assets.”
Deficiency Judgments and Post-Foreclosure Financial Problems
When we hear about foreclosure, the immediate concern for most of us is the prospect of losing a home.  To be sure, when a property goes into foreclosure, an Oak Park consumer with a long history of residing in that house can find himself without a place to live.  And while the thought of foreclosure produces anxiety for many residents of the Chicago area, post-foreclosure problems may prove to be even more stress-inducing than the prospect of foreclosure itself.
What’s happening?  In short, most banks have sold properties that went into foreclosure, but those sales didn’t produce enough revenue to cover what the debtor owed (in terms of the loan, as well as penalties and legal fees).  As such, lenders have been trying to obtain that lingering debt from borrowers.  In order to seek out this money, lenders can use “deficiency judgments.”
What are deficiency judgments?  In short, they’re judgments that “can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come.”  Debtors can have their wages garnished and their assets seized so that the lender recoups what it’s owed.  In a number of cases, these debtors don’t see this legal tool coming.  After facing foreclosure years ago, consumers who had financial troubles when the real estate market crashed have since gotten their lives back on track.  Indeed, many have even been able to purchase new homes and have been making regular monthly mortgage payments.
“Huge Uptick” in Deficiency Judgments, Says Sandra Emerson
According to the article, most borrowers are surprised to learn that they “still owe thousands of dollars on homes they haven’t thought about for years.”  And indeed, these lawsuits that seek to recover those funds are on the rise.  Sandra Emerson, a dedicated homeowner attorney in the Chicago area, emphasized the increase in deficiency judgments.  She told Reuters, “I’ve definitely noticed a huge uptick,” and she emphasized that, in previous year, “they didn’t include language in court motions to pursue these.  Now, they do.”
Are deficiency judgments fair?  Or do consumers deserve a break after recovering from the recent financial crisis?  If you ask a bank advocate, that person will tell you that deficiency judgments are fair, as “former homeowners ought to pay what they owe.”
But if you ask a consumer advocate, that person might tell you that “deficiency judgments blast those who have just recovered from financial collapse back into debt,” which is especially problematic when “the banks bear culpability because they made the unsustainable loans in the first place.”
Bankruptcy May Help Consumers in Post-Foreclosure Crises
What options are available to consumers who have been saddled with deficiency judgments?  One option is personal bankruptcy.  Although consumer bankruptcy can significantly affect your credit and can make it difficult to find creditors for home loans or credit cards, it might be able to wipe away your debts.
Have you been affected by a deficiency judgment?  If you have questions about your rights as a consumer, it’s important to speak with an experienced Chicago consumer law attorney.  Contact the Emerson Law Firm today to learn more about how we can assist you.
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