Foreclosure Surge: Question is Not When, But How Much?

The sharp economic declines brought about by the coronavirus pandemic do not show signs of improving significantly in the coming months. According to an article in Politico, the initial closures resulting from the spread of COVID-19 led to the “deepest recession in decades,” and recovery has slowed due to the recent spikes in coronavirus cases across the country. Indeed, as Fed Chair Jerome Powell explained, “the pace of the recovery looks like it has slowed,” and “the current economic downturn is the most severe in our lifetimes.” As the economy struggles to rebound—and indicators suggest that a full and quick rebound is unlikely—homeowners will struggle to make mortgage payments and will face foreclosure.

According to a recent report from DSNews, the question has become just how much of a foreclosure surge we are likely to see as opposed whether one will occur. In other words, more foreclosures are likely to happen, but the question is: how many?

Foreclosure “Surge” is Now Likely

The prohibition against foreclosures on federally insured homes expired on July 31, and there has been no indication that it will be extended. Accordingly, as the DSNews report underscores, the foreclosure surge now appears likely. Looking ahead to the coming year, an ATTOM Data Solutions study has “anticipate[d] worst-, middle-, and best-case outcomes for foreclosure rates.”

What does the worst-case scenario suggest? If Congress does not act quickly and provide additional relief for homeowners who have lost their jobs and are struggling to make their mortgage payments, “residential evictions due to delinquent loan payments could double or worse in the coming year.” In this worst-case-scenario, more than 500,000 homes would be in an “initial-foreclosure-notice phase” in less than a year.

Worst-Case Scenario is Not a Given

In all likelihood, the middle-case scenario might provide a better estimate of the likely number of foreclosures if the government does provide some relief. In that case, “about 225,000 properties next spring will land between initial-foreclosure-notice phase and final resale by lenders that have taken over properties.” However, the report emphasizes that, even if Congress extends the foreclosure moratorium, that action alone will not be sufficient to prevent foreclosures and could, in some scenarios, end up causing trouble in the long run. The report explains how “foreclosure moratoriums can bring short-term relief to a market in crisis,” but “they can be ineffective and even potentially harmful when used as a long-term foreclosure prevention treatment.”

While the worst-case scenario looks bad, it is certainly not a given. Some states are also more likely than others to see a doubling and tripling of foreclosure rates than others. Foreclosure rates in the Midwest, according to the mid-level scenario, would likely double. Other regions of the U.S. would see a bigger surge in foreclosures, with rates of foreclosure activity tripling, such as in the South and West, and in some Northeastern states.

Seek Advice from an Oak Park Foreclosure Defense Lawyer

If you are at risk of foreclosure, there are options to avoid foreclosure. An experienced foreclosure defense lawyer in Oak Park can speak with you today about your options for preventing foreclosure. Contact the Emerson Law Firm to learn more about how our firm can help.



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High-Fee Credit Cards Target Consumers with Poor Credit Histories

Recently, we explained that the Supreme Court ruled that binding arbitration clauses in credit card agreements are permissible, making it harder for consumers to challenge lenders in courts.  In fact, the Supreme Court’s decision all but ensures that a significant number of consumers will lock themselves into such agreements without realizing they cannot sue their credit card companies in court.  Compounding this setback for consumers, the Consumer Financial Protection Bureau is now proposing the reversal of a ban on exorbitant credit card sign-up fees. 

 

Those of us working in Chicago bankruptcy law know that many consumers in the greater Chicago area and across the country are still struggling.  Unfortunately, at least some of the current economic recession is due in part to poor choices made by those in the financial industry.  Many big banks were bailed out, and a number of predatory lending practices have been exposed.  Yet our Oak Park bankruptcy attorneys know that unscrupulous lenders may still prey upon consumers if our legislators do not remain vigilant.

According to an article in The Washington Post, the high credit card fees target consumers with poor credit histories.  The high-fee credit cards are known as “fee-harvester cards” because they typically have low credit limits, but high fees and interest rates, sometimes up to 36%.  Consumers trying to rebuild their credit histories with high-fee credit cards (likely because it is difficult to obtain approval for other cards) could actually cause their scores to plunge even further.

Three years ago Congress attempted to curb high-fee credit cards as part of a plan to address abuses by the credit card industry.  Congress wanted to cap the fees a credit card issuer could charge at 25% of the card’s limit during its first year of use.  So, for example, a card with a $300 credit limit would have a $75 annual fee.  However, such high-fee cards also come with a large up-front fee—e.g. $95 to open the account—which lenders can legally charge because the fee is imposed before the account is opened, thus circumventing the cap required by Congress.  In 2010, the Federal Reserve tried to extend the cap to include up-front fees, but its plan was thwarted, at least temporarily, by a lawsuit seeking a preliminary injunction to stop the rule from taking effect.

The Consumer Financial Protection Bureau (CFPB), formed last summer, took over the responsibilities formerly held by the Federal Reserve and other agencies for regulating consumer protections.  Yet the CFPB, an agency that is supposed to be working to protect consumers, is now proposing to undo the Federal Reserve’s regulation on up-front fees, which would allow banks to impose large sign-up fees (and high annual fees as well). 

Those of us working in Oak Park bankruptcy hope the government will do what is best for consumers.  Making the decision to file for bankruptcy is not easy, but there is no shame in asking for help and finding out about all of the legal options available to you.  If you are concerned about your credit card debt, or if you are worried you might lose your home to Chicago mortgage foreclosure, please consider speaking with a qualified professional today.

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Federal Agency Finds that 1 in 5 Families are Struggling with Medical Debt

Supreme Court Finds Binding Arbitration Clauses in Credit Card Agreements Permissible

Lawmakers Target Student Loan Debt as Next Debt Bubble

Lawmakers and those working in the financial industry have been predicting for some time that student educational debt will be the next big financial bubble to burst.  Illinois Senator Richard Durbin recently took aim at the private student-loan industry, advocating for new rules that would permit educational debts to be cleared away during bankruptcy, reports the Washington Post.  The ballooning cost of higher education and the long-term effects of student loan debt have caught the attention of lawmakers in Chicago and across the nation.  Some believe the current restrictions on discharging educational debt must change.

Last month, the Senate judiciary subcommittee held a hearing to discuss the problem.  As our Cook County bankruptcy lawyers know, the Federal Reserve Bank of New York issued a study finding that Americans owe about $870 billion in student loans.  That whopping figure surpasses the amount of outstanding credit-card debt or automobile loans.  Even worse, according to the report, more than a quarter of borrowers had past due balances.

Those of us working in Oak Park bankruptcy are concerned about high educational debt, too.  We realize that many Chicago area residents are bearing the heavy burden of paying back substantial student loans.  This, in turn, jeopardizes their overall financial security, and can impede their ability to buy a home, take out a car loan, or pay off medical debt.  Frequently, high debt, including educational debt, also goes hand-in-hand with the threat of Illinois mortgage foreclosure.

Currently, consumers cannot discharge student debts even if they file for bankruptcy.  Thus, those debts can cast a shadow over one’s financial security for decades.  Other debt, such as mortgages and credit card debt, typically can be discharged.  As Senator Durbin said during his opening comments at the judiciary subcommittee hearing, “It is clear that too many students have been steered into loans that they will not be able to repay and that they will never be able to escape.”

What is particularly concerning for us is that it is not only young people who are burdened with heavy debt.  The New York Federal Reserve study found that Americans 60 and over accounted for nearly 5% of past due student loan balances.  Rather than focusing on retirement and health care costs, notoriously high for older individuals, they are instead concerned about paying decades-old educational debt.  One consumer advocate who works for the National Consumer Law Center said she works with consumers in their 80s whose Social Security checks are being garnished to pay for old student loans.

The legislation sponsored by Senator Durbin would permit private student loan debt to be discharged in bankruptcy.  Consumers would still have to pay back their federal student loans.  This may not even go far enough, however, as it is likely that the bulk of student loan debt stems from federal loans.                        

So, the jury is still out on how to resolve the problem of student loan debt, an issue one consumer group has called the country’s next “debt bomb.”  It is important to note that while the law is still evolving in this area, Chicago bankruptcy law does permit many types of debt to be discharged.  Therefore, it is crucial to find out if you are eligible to file for bankruptcy if you are struggling.  There are many viable avenues to pursue to help you and your family regain financial security.  Please contact our firm today if you have questions about the process of filing for bankruptcy. 

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Federal Agency Finds that 1 in 5 Families are Struggling with Medical Debt

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Federal Agency Finds that 1 in 5 Families are Struggling with Medical Debt

A recent survey conducted by the Centers for Disease Control (CDC) shows 1 in 5 Americans say their families are having trouble paying their medical bills.  Even more concerning, 1 in 10 Americans say their families are unable to pay anything toward their medical debt.  Such dismal statistics are indicative of a larger problem.  Americans are overburdened with debt and homes that are no longer worth what they once were.  Though the U.S. created more than 200,000 jobs in February, which is a great start, many Chicagoland residents and citizens across the country are still searching for long-term employment.  As our Oak Park and River Forest mortgage foreclosure lawyers know, many families in the Chicago area continue to struggle.  

The CDC’s survey is the first time the government agency has looked at this issue in such a comprehensive way, reports The Washington Post.  The agency surveyed 52,000 people from January through June of last year.  People from low-income backgrounds reportedly struggled the most.  They were three times more likely to have difficulty paying their medical bills.  Additionally, the survey finds that 1 in 4 families are paying their medical bills late, which can damage credit scores and make it more difficult for families to refinance or take out loans in the future.

One important side effect of high medical debt—and of debt in general—is that it jeopardizes the economic security of Chicagoland families.  Oak Park or River Forest homeowners with high medical debt may find it more difficult to keep current on their mortgages.  In this tough economy, many Cook County families have found themselves amidst a perfect storm of an underwater mortgage, high medical or credit card debt, and unemployment or underemployment.  An increasing number of Chicago residents are also burdened with very high educational debt with few prospects of decent employment. 

It’s important to remember that many types of debt are dischargeable through bankruptcy.  Our firm frequently handles Chapter 7 bankruptcy cases.  Chapter 7 bankruptcy allows you to consolidate student loans, protect loan co-signers, or eliminate credit card debt.  You may want to consider filing for bankruptcy if you have faced a serious financial setback, such as divorce, an injury or illness resulting in high medical bills, or job loss or a reduction in pay.  Filing for bankruptcy can help repair your credit, which can help you regain control of your finances.  But remember that not all debt is dischargeable through bankruptcy, so it is important to consult with an Oak Park bankruptcy attorney to determine if you are eligible. 

Our Cook County bankruptcy lawyers know that filing for bankruptcy is a difficult decision.  It can be a complicated and seemingly overwhelming process, but your situation may not be as hopeless as it seems.  There are many legal options available to you, and speaking with a qualified professional typically can help alleviate some of your anxiety or concerns.  If you are thinking about filing for bankruptcy, please consider contacting our Oak Park office for a confidential bankruptcy consultation.

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Supreme Court Finds Binding Arbitration Clauses in Credit Card Agreements Permissible

A recent Supreme Court decision came as a major setback for credit card users and consumer protection advocates, who have been tirelessly fighting for the past several years to obtain stronger protections for consumers.  The 8-to-1 decision in CompuCredit Corporation v. Greenwood held that consumers who sign a credit card agreement containing an arbitration clause do not have the option to dispute any charges or fees in court.  Consumers will be bound to so-called adhesion clauses, which means they will be stuck with the terms laid out in agreements created by big companies.  Such clauses are one-sided and force consumers to bring any disputes to arbitration rather than providing them with the option of suing in court or filing class action lawsuits.

The decision also holds that arbitration clauses contained within credit card agreements trump a 1996 federal law that permitted disgruntled consumers to take disputes with credit card companies to court, reports Forbes.  Chicago bankruptcy attorneys know that most credit card companies bury arbitration clauses in lengthy and complex agreements that customers must sign before they can obtain a credit card.  Because credit card companies design such agreements in their favor and consumers do not have the option to negotiate contract terms, the recent Supreme Court ruling gives credit card providers (as well as companies that provide borrowers with car and student loans) “an inordinate amount of power,” says Michael Calhoun, president of the Center for Responsible Lending.  Those working in Illinois bankruptcy law realize that when consumers do not possess legal recourse to challenge big companies, there is a serious imbalance in bargaining power.

Since the law gives credit card and other loan servicing companies the power to create one-sided agreements, virtually every consumer loan agreement now has an arbitration clause written into it.  Our Oak Park foreclosure defense lawyers know that there is one major exception to this.  Mandatory arbitration clauses in mortgage loan agreements are strictly prohibited.

Arbitration does have some advantages.  It can be quicker, cheaper, and more efficient than court proceedings for some consumers.  On the other hand, it can give banks and big companies a disproportionate amount of power over people who do not have as much influence in the system, including everyday consumers.  One problem, reports SmartMoney, is that there is not a lot of data on cases that go to arbitration because those cases are often kept private, making it difficult to evaluate the true impact of arbitration clauses on consumers.  The data that is available suggests few consumers are successful in arbitration.  For example, Public Citizen, a nonprofit consumer advocacy group, reports that California credit card users won just 4% of cases that went to arbitration while card issuers won 94% from 2003 to early 2007.

In recent years, binding arbitration clauses were becoming less popular, due in part to the efforts of consumer advocates.  After the CompuCredit decision, however, that trend may change.  Unfortunately, the Supreme Court’s ruling allows credit cards providers to adopt a “take it or leave it” attitude when it comes to constructing consumer contracts.  An attitude, it seems, that may be here to stay.

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Illinois Debtors Should Ensure That Bankruptcy Petitions Are Prepared Legally

Illinois Debtors Should Ensure That Bankruptcy Petitions Are Prepared Legally

Our Oak Park bankruptcy lawyers know that filing for bankruptcy has become a reality for many Chicagoland residents who decide it is necessary as a last resort.  Bankruptcy is a legal procedure for dealing with consumer and/or business debt and is typically a one-time event for most people.  If you are not familiar with the process, it can sometimes seem overwhelming.  Many debtors worry that their situation is hopeless, but, thankfully, that is not true. 

If you are considering filing for bankruptcy, one of the most important things is to make sure you are completing all of your paperwork legally and above-board.  For example, as Delmarva Now News reports, someone who is not a lawyer (or who does not work for a lawyer) who prepares bankruptcy petitions for a fee and does not sign the petitions is violating federal law.  A bankruptcy petition is the official document that a debtor or creditor files to start a bankruptcy case.  It is legal for a non-lawyer to prepare bankruptcy petitions for a fee.  However, those preparers must sign the petition as well as other documents that must accompany the petition.  Bankruptcy petition preparers must also make significant written disclosures to the debtors they assist and provide those debtors with a written contract.  All of these requirements are essential to making sure your bankruptcy documents are prepared in accordance with Illinois bankruptcy law.

On the other hand, bankruptcy petition preparers who are not lawyers may not provide legal advice.  Changes to U.S. bankruptcy law frequently occur, so you should seriously consider consulting a legal professional to help you with your case.  A professional well versed in Illinois bankruptcy law can help assist you in answering many of the important questions you are sure to have if you are considering filing for bankruptcy.  For example, you might wonder what assets, if any, you can keep after filing for bankruptcy.  You may also be unsure whether you should even file for bankruptcy or may need to know what type of bankruptcy to file. 

While it can be tempting to cut corners, doing so could have serious, long-term consequences for you, your business, or your family.  If a problem arises with your bankruptcy petition, and you did not seek the help of a bankruptcy lawyer a debtor could be on his or her own.  This is because a bankruptcy petition preparer cannot represent a debtor, even at a creditors meeting.  If the petition is not prepared properly, it can result in the debtor’s case being dismissed or in a delay in the proceedings.  Debtors may also have to repay filing fees, which can add up if you are concerned about finances.

Our Oak Park bankruptcy attorneys work with clients to best meet their needs.  We realize that financial troubles can often seem overwhelming and that it can be difficult to admit you need help.  In these tough economic times, our lawyers will do everything they can to help you consider all of your options.  For a confidential bankruptcy consultation with the Emerson Law Firm, please call our office at 708-660-9190 or visit us online.

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Oak Park Bankruptcy Lawyers Share Data About Increased Pro Se Filings

Chicago Bankruptcy Lawyer Shares New Report Revealing Many Debtors Fail to Seek Professional Assistance

Oak Park Bankruptcy Lawyers Share Data About Increased Pro Se Filings

Our Chicago bankruptcy lawyers have learned that the Administrative Office of the U.S. Courts recently released a report outlining a troubling phenomenon in bankruptcy filings.  Over the past five years, according to the report, the growth of pro se bankruptcy filings has outpaced the rate of growth of overall bankruptcy filings.  This revelation is disturbing because it suggests that some of the nation’s most financially vulnerable citizens believe they must go it alone rather than hiring an attorney when facing bankruptcy. 

Pro se legal representation means that a person is representing himself or herself without legal counsel in a court proceeding.  A person may choose to represent himself or herself for many reasons, but, typically, it is because the person believes he or she does not need or cannot afford an attorney.  However, this often is not the case.  It is almost always worth considering hiring an attorney because it can mean a big difference in the outcome of your case.  

Over the past five years, non-pro se bankruptcy petitions increased 98%, but pro se bankruptcy petitions grew 187% over the same time period.  Pro se chapter 7 filings also rose 208%, and pro se chapter 13 filings increased 189%.  Chapter 7 bankruptcy is a process of debt liquidation under which debtors may consolidate student loans, protect loan co-signers, or eliminate credit card debt.  Chapter 13 bankruptcy is a process of debt restructuring that allows debtors to reorganize their debt under the supervision of a federal bankruptcy court.  Chapter 7 and chapter 13 filings make up the vast majority of overall bankruptcy filings.

The report found that the number of pro se petitions did not occur uniformly throughout the country.  For example, such filings increased most rapidly in the western part of the United States.  Illinois was not one of the top areas in which pro se bankruptcy filings increased.  Although the Northern District of Illinois had the second most filings in 2011 (with 63,440 filings), it ranked 39^th for pro se filings.

One legal scholar has suggested that the adoption of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 may have influenced the dramatic increase in pro se filings. The BAPCPA made several significant changes to the U.S. bankruptcy law.  For one thing, the BAPCPA made it more difficult for some consumers to file bankruptcy under chapter 7.  Thus, those consumers likely must file under chapter 13 instead.  This can have serious implications because under chapter 7 most debts are forgiven (or discharged), but under chapter 13, debts are discharged only after the debtor has repaid some portion of those debts.

The rapid increase of pro se bankruptcy filings suggests that debtors are struggling and that their legal rights may be negatively impacted.  For example, in a post on LexisNexis’ Bankruptcy Law Blog, this scholar noted that pro se filings are much less likely to succeed than filings by represented debtors. The post cited data presented at the National Conference of Bankruptcy Judges, which showed that nearly 90% of pro se chapter 13 debtors had their cases dismissed prior to confirmation of a plan and only 4% still had a case pending after four years.  A 2007 sample showed that 17.6% of pro se chapter 7 debtors had their cases dismissed for technical problems as compared to only 1.9% of represented debtors.

Such data is extremely concerning because meritorious claims may be dismissed due to technical issues.  Chicagoland bankruptcy attorneys know this is more likely to happen when debtors are not represented by legal counsel. 

The Oak Park bankruptcy lawyers at the Emerson Law Firm understand that financial troubles can often seem overwhelming and that it can be difficult to admit that you need help.  In these hard economic times, our attorneys will do everything they can to help you consider all of your options.

You can read the Administrative Office of the U.S. Courts’ full report here.  For a confidential bankruptcy consultation, please visit the Emerson Law Firm online or call 708-660-9190.

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Chicago Bankruptcy Lawyer Shares New Report Revealing Many Debtors Fail to Seek Professional Assistance

There is no easy way to admit that you are struggling to keep up with your monthly financial obligations.  Our Oak Park bankruptcy attorney has worked in the area long enough to understand the social, mental, and emotional challenges that come when one hits a rough financial patch.  Besides having the worry of not being sure how you will pay for basic needs, many local community members have the added stress of feeling ashamed about their financial position.  Yet, the fact remains that help is available for all residents to get out of these sticky financial situations. One need only know where to look.

Unfortunately, a new study reported in Loans Safe explained that a large percentage of those who could most benefit from have guidance with debt and credit issues fail to seek out the available help.  The latest research indicates that the number of people who visited a professional to receive debt assistance decreased 20% last year.  Instead, many families have taken a “head in the sand” approach which often leads to even more credit card debt, late payments, and the stress that comes worrying about how the situation will ever be resolved.  Ask any Chicago bankruptcy lawyer and they will explain how many of their clients admit to waiting longer than they probably should have before seeking out their services to learning what options are available.

Those looking into the matter explain that various factors may be at play in discouraging those who could benefit from visiting a professional from doing so.  For one thing, the emotional stress that comes with admitting that help is needed prevents many consumers from taking steps when they should.  In addition, one researcher said, “I think some are just tired of trying and have given up.”  With unemployment figures remaining high, poverty increasing, and ideas for improvement few and far between, it is easy to see how some facing complex financial challenges feel like giving up.  But it is important to remember on the flip side of the coin that the moments when things feel the most hopeless are the same moments when there is nothing to lose from trying something new.

The first step in getting things back on track is understanding what financial challenges you face and learning how the law applies in your case.  Visiting a Chicago bankruptcy lawyer to learn about your options does not obligate you to any course of action.  However, no matter what, much peace of mind comes with discovering whether bankruptcy is a logical step in your situation.  Contrary to the misperception of some, filing for bankruptcy is not a step that will permanently ruin your credit.  In fact, it is intended specifically help repair credit and allow those who need it a fresh start to get their financial affairs back in order.   In our area, Illinois bankruptcy law eliminates certain debts while allowing the resident to keep certain property such as pension and retirement plans, Social Security benefits, life insurance policies, and a variety of personal property.  Please consider giving our legal professionals at the Law Office at Sandra M. Emerson a call or visit us online today to schedule a bankruptcy consultation.     

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