Monday, June 22, 2020

Foreclosure Moratorium Re-Extended

If you lost your job as a result of the COVID-19 pandemic and you are struggling to pay your mortgage payments, you may be able to breathe a temporary sigh of relief. According to a recent report in HousingWire, the Department of Housing and Urban Development (HUD) just announced that the federal Housing Administration (FHA) is going to extend its existing moratorium on foreclosures. Initially, the moratorium was set to expire in May and was extended until June 30. Now homeowners have additional protections with another two-month extension until August 31, 2020. We want to tell you more about the additional extension of the foreclosure moratorium and to provide you with information about options for preventing foreclosure.

FHA Will Extend Foreclosure Moratorium Until August 31, 2020
The recent announcement by HUD explains that the foreclosure and eviction moratorium from the FHA will be extended for a second time through August 31, 2020. However, it is important to understand that this moratorium does not apply to any homeowner with a mortgage. Rather, it applies to “homeowners with FHA-insured Title II Single-Family forward and Home Equity Conversion mortgages.” Other homeowners with different types of loans are not eligible for the extension on the moratorium and could be at risk of foreclosure if they do not make mortgage payments.

For those who are covered by the extended moratorium, what does the extension mean in practice? Mortgage servicers will need to “halt all new foreclosure actions and suspend all foreclosure actions currently in progress, excluding legally vacant or abandoned properties.” In addition, any properties that are FHA-insured and are designated as Single-Family properties will have an eviction moratorium, meaning that servicers will need to stop any evictions. That eviction moratorium does not apply to properties that are legally vacant or abandoned. The eviction protections in place apply to renters who are renting from a landlord with a federally backed mortgage.

Options if You are Not Eligible for the Foreclosure Moratorium
If you own a home that is not eligible based on the classifications explained above, you may still have options to avoid or stop a foreclosure. The CARES Act outlines certain mortgage forbearance options, which you should discuss with your mortgage servicer. To qualify for CARES Act protections, your mortgage will need to be federally owned or backed by one of the federal agencies or entities, such as HUD, the FHA, the USDA, the U.S. Department of Veterans Affairs, or Fannie Mae or Freddie Mac.

If your mortgage is not backed by the federal government, your mortgage servicer may still be willing to offer a forbearance for coronavirus-related hardship. If you cannot obtain a forbearance and cannot make your mortgage payments, it may be possible to work with a foreclosure defense lawyer on alternative options. You may be able to have your mortgage refinanced, and if necessary, you may be able to stop a foreclosure by filing for Chapter 13 bankruptcy. However, in order to qualify for Chapter 13 bankruptcy, you will need to be able to prove that you have income to make payments on a debt reorganization plan.

Seek Advice from an Oak Park Foreclosure Defense Attorney
If you have questions or need assistance avoiding foreclosure, an experienced Oak Park foreclosure defense lawyer can speak with you today. Contact the Emerson Law Firm to learn more about how we can assist you.

See Related Blog Posts:

Bankruptcy and Home Foreclosure: What You Should Know

Will Foreclosure Rates Soon Exceed Those of the 2008 Financial Crisis?

Sunday, June 14, 2020

Bankruptcy and Home Foreclosure: What You Should Know

What are the links between personal bankruptcy and foreclosure? Is there any risk of losing your home if you file for bankruptcy? You may have heard that some forms of bankruptcy can actually prevent foreclosure in certain circumstances. Accordingly, you may be wondering, if I want to stop a foreclosure, which type of bankruptcy should I file? There are some significant ways in which consumer bankruptcy and home foreclosure are interrelated. If you are struggling with debt and own your home, it is important to gain a clear understanding of the potential ties between bankruptcy and foreclosure.

Chapter 13 Bankruptcy May be Able to Stop a Foreclosure and Allow a Consumer to Stay in the Home
One of the most significant tools in a Chapter 13 bankruptcy is the automatic stay because it can allow a homeowner who is behind on mortgage payments to stop a foreclosure. While the automatic stay applies in any bankruptcy case, it is particularly important for consumers in a Chapter 13 bankruptcy case who are at risk of losing a home to foreclosure.

As you may already know, Chapter 13 bankruptcy is a “reorganization” bankruptcy under the U.S. Bankruptcy Code. As such, when a debtor files for Chapter 13 bankruptcy, the automatic stay prevents creditors or collectors from taking any additional actions on existing debt (including mortgage debt), and the debtor has the opportunity to reorganize debts in a repayment plan. The terms of the repayment plan usually last three to five years, and that plan gives debtors an opportunity to get back on track with mortgage payments. To be clear, the automatic stay can stop the foreclosure, and the repayment plan allows the homeowner to get back on track with mortgage payments to keep the home.

Chapter 7 Bankruptcy Cannot Prevent a Foreclosure
While Chapter 13 bankruptcy can stop a foreclosure and can allow the debtor to remain in his or her home, it is important to understand that Chapter 7 does not have the same ability. Chapter 7 bankruptcy is a liquidation bankruptcy, which means that any non-exempt debt will need to be sold (or liquidated) to repay creditors. Once the bankruptcy process is complete, usually in a number of months, eligible debt will be discharged. Given how the Chapter 7 bankruptcy process works, it will not be possible to file for Chapter 7 bankruptcy and expect to avoid a foreclosure and then remain in the home.

Illinois Does Not Have a Significant Homestead Exemption in a Chapter 7 Bankruptcy Case
While the Illinois homestead exemption may not have a direct correlation with foreclosure, it is important to know that, if you file for Chapter 7 bankruptcy—even if you are not at risk of foreclosure—you may not be able to keep your home. While some states have much higher homestead exemptions, Illinois only has a $15,000 homestead exemption (or $30,000 for a married couple that files for bankruptcy together). A bankruptcy lawyer can discuss the implications with you if you currently own a home and are considering Chapter 7 bankruptcy.

Contact a Bankruptcy Lawyer in Oak Park
If you have questions about bankruptcy and foreclosure prevention, one of our experienced Oak Park bankruptcy attorneys can speak with you today about your case. Contact the Emerson Law Firm for more information.

See Related Blog Posts:
Benefits of Filing for Bankruptcy
Reasons Why Filing for Bankruptcy Sooner Could Benefit You in the Long Run