Does Bankruptcy Always Stop Foreclosure?

If you are struggling with debt and you are also struggling to make mortgage payments, you might have heard information about bankruptcy being able to stop a foreclosure. When you are at risk of your home going into foreclosure and one of your primary aims in filing for personal bankruptcy is to stop the foreclosure and to be able to remain in your home, you may be planning to file for bankruptcy to get back on track with your mortgage payments. However, it is important to understand that not all bankruptcy chapters have the same effect on foreclosures.

If you are planning to file for bankruptcy with a primary aim of stopping foreclosure on your house, it is critical to seek advice from an Oak Park bankruptcy lawyer about your case. We can provide you with more information about the ways in which bankruptcy and foreclosure can be connected, and we can help you to file for the type of bankruptcy that is best suited to your circumstances.

In the meantime, consider some of the following information that helps to clarify the ways in which bankruptcy has the ability to stop home foreclosures.

Automatic Stay Initially Stops Foreclosure in All Bankruptcy Cases

In every consumer bankruptcy case, the automatic stay will initially stop a foreclosure from moving forward or taking place. However, the automatic stay cannot stop foreclosures indefinitely in all types of bankruptcy cases.

You Cannot Keep Your House if You are Filing for Chapter 7 Bankruptcy and Behind on Your Mortgage Payments

If you are filing for Chapter 7 bankruptcy, the automatic stay will initially stop a foreclosure, but it cannot permanently stop a foreclosure and allow you to keep your home. If you are behind on mortgage payments, you will likely need to plan for the lender to take possession of the property or to sell the house.

Chapter 13 Bankruptcy Can Stop Foreclosure and Allow You to Keep Your Home

If you want to use bankruptcy to stop a foreclosure and to keep your home, you will want to file for Chapter 13 bankruptcy. This type of reorganization bankruptcy will allow you to keep your home. How does it work?

The automatic stay will apply as soon as you file for Chapter 13 bankruptcy, and the lender will not be able to move forward with any aspects of a foreclosure case—whether it is initially filing an action to initiate a judicial foreclosure or moving forward with an existing foreclosure case. Then, since Chapter 13 bankruptcy is a kind of reorganization bankruptcy, you can create a repayment plan that will allow you to catch up on back-owed mortgage payments and to remain in your home.

Contact an Oak Park Bankruptcy Lawyer Today

If you have questions about how filing for bankruptcy can stop foreclosure, or if you need assistance with your Chapter 13 bankruptcy case, one of our experienced Oak Park bankruptcy attorneys is here to help with your case. Contact the Emerson Law Firm to learn more about how we can assist you.


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Short Sale or Chapter 7 Bankruptcy?

If you are facing foreclosure, you may be looking at options to avoid foreclosure such as a short sale or a deed in lieu of foreclosure, but you also might be thinking about filing for Chapter 7 bankruptcy. Which option is the right one for you? In order to reach a definitive decision, it is always a good idea to seek advice from an experienced Oak Park foreclosure defense attorney about your particular situation and the facts surrounding your case. In the meantime, we want to explain some of the issues that might arise when deciding between a short sale or a Chapter 7 bankruptcy filing.

Thinking About Short Sales and Bankruptcy Based on Your Existing Debt

If you are considering the possibility of a short sale or filing for Chapter 7 bankruptcy, it is important to think carefully about the other debt you have currently. Is the majority of your debt associated with your mortgage, or are you also facing a looming amount of consumer debt from medical bills, credit cards, student loans, or other debt sources? If it is the former—that is, if most of your debt is linked to your mortgage—a short sale may be a strong option for avoiding foreclosure while also allowing you to avoid a bankruptcy filing. Yet if you are also struggling with a significant amount of additional debt, some of the limitations associated with a short sale might mean that filing for Chapter 7 bankruptcy will be more beneficial for you.

Short Sales Can Allow You to Avoid Foreclosure but May Come With Debt

What are those limitations of a short sale when it comes to avoiding foreclosure? First, let us emphasize that short sales can be extremely beneficial for consumers who are struggling largely with mortgage debt and are facing foreclosure. To be clear, a short sale is a process through which your mortgage lender can agree to take a payment for less than the amount you owe on your mortgage and release its lien for that lower amount so that the house is not ultimately sold through the foreclosure process. How does this work? The house will be put up for sale as a short sale, and even if it sells for less than the amount you owe on your mortgage, the lender will accept that amount.

However, there are some potential complications. If your mortgage lender will not waive the deficiency amount—the amount of money still owed based on the sales price of the house and your mortgage amount—then you will still owe that money. These deficiencies can range widely in amount, from several thousand dollars to tens of thousands of dollars. Your lawyer can help you to negotiate a waiver from the lender so that you do not owe this money. Yet even if the lender agrees and forgives the remaining amount, you will likely be required to pay taxes on that forgiven amount. While the tax on $5,000 of forgiven debt will not be particularly steep, the tax consequences of having, for example, $100,000 or more of mortgage debt forgiven can be significant.

Learn More From a Foreclosure Defense Lawyer in Oak Park

If you are considering a short sale or bankruptcy, you should seek advice from our Oak Park foreclosure defense attorneys today. Contact the Emerson Law Firm for more information.



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Avoiding Credit Card Debt in Chicago this Holiday Season

Dealing with substantial credit card debt can be frustrating, and it may feel as though you will never be able to get ahead. During the holiday season, many Chicago residents, along with consumers across the country, will spend hundreds and sometimes thousands of dollars on gifts, decorations, and holiday travel. For many families, the additional expenses that accrue during the holidays are beyond their monthly budget. What happens when families do not have the necessary cash to pay for holiday costs? By and large, many of them turn to credit cards. For those Americans who are already struggling with credit card debt, the holidays can be a particularly difficult time.

In some cases, consumers who have unmanageable credit card debts may be eligible for personal bankruptcy. However, consumers cannot simply plan to file for Chapter 7 bankruptcy and, before doing so, rack up additional credit card debt during the holidays. Regardless of your plans for bankruptcy, it is important to consider ways of avoiding additional credit card debt this holiday season.

Costs are High for Holiday Spending, from Gifts to Seasonal Travel

How much do Chicago residents spend, on average, over the holidays? Each year, the American Research Group, Inc. conducts surveys to determine how much the average household plans to spend during the holiday season. According to its fact sheet, last year the average spending per adult totaled $882. That total represents a 2% increase from the previous year, in which the average spending per adult was listed as $861. For some, this might not sound like a lot of money to spend during the entire holiday season. However, this number is the average of spending on Christmas gifts alone. In other words, it does not include purchases for holiday meals, decorations, and other expenses associated with the season.

If the average adult is spending nearly $900 alone on gifts—a number that likely goes well above $1,000 when adding in other costs—how is the average adult paying for these items? According to a recent article in Forbes Magazine, many Americans are swayed by the in-store discounts associated with store credit cards. However, as the article clarifies, these credit cards often serve only to put consumers deeper into debt.

Spending on Credit in Illinois During the Holidays

Last year alone, we mentioned that the average American adult spend $861 on gifts. According to the Forbes article, holiday spending in general “sent the average American $986 deeper into debt.” Many of those debtors decided to use store credit cards in order to receive particular discounts and other perks. In the long run, however, store credit cards may only encourage more spending—of money that consumers do not have—making the small discounts and perks negligible.

Most importantly, consumers need to recognize the different between waived interest and deferred interest. Most store credit cards that offer 0% financing offers during the holidays have deferred interest, which means that all of the interest will come due if you do not pay off the balance within a certain period. Moreover, the APR on a store credit card is typically very high. For instance, a Lowes card “charges a flat APR of 26.99%.” In brief, unless you can afford to pay of the balance in a relatively short period of time, relying on store credit cards to make holiday purchases can set you back further in the long run.

If you have questions about managing consumer debt or filing for personal bankruptcy, an Oak Park bankruptcy lawyer can assist you. Contact the Emerson Law Firm today.

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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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Bankruptcies Down, Foreclosures Up in Chicagoland

For struggling Chicagoland families, bankruptcy and foreclosure often go hand-in-hand.  It is not uncommon for families facing serious financial difficulty to fear they will lose their homes and to consider filing for bankruptcy.  As our Oak Park foreclosure lawyers know, there are many legal options available for struggling Illinois residents, as well as several new federal and state programs that specifically provide assistance for homeowners.  Our attorneys frequently follow the trends of foreclosure and bankruptcy across the nation and in the Chicago area to ensure we have as much up-to-date information as possible about the factors currently affecting the economy.

For example, local bankruptcies are on the decline, in contrast with the current national trend, according the Medill Reports.  According to data reported by the U.S. Bankruptcy Court in the Northern District of Illinois, the number of bankruptcy filings has dropped in January, February, and March of this year in comparison to those same months in 2011.  Those of us working in Chicago bankruptcy law know that lower filing numbers have been occurring for a few years now.  In 2011, bankruptcy filings dropped about 10% from 2010, the first annual decline since 2006.  On the other hand, bankruptcy filings across the nation rose last year from approximately 1.53 million in 2010 to 1.57 million in 2011, an increase of 2.6%.  Numbers for the first quarter of 2012 are not yet available.

Experts are divided over the reasons driving this trend.  Some experts attributed the local decline to a slightly improved economy, as well as low mortgage interest rates and tougher controls over borrowing.  However, others have questioned whether the decline is indicative of an overall trend.  Numbers may be low at the beginning of the year because consumers choose to wait until closer to the filing deadline to declare bankruptcy.  Many Oak Park and River Forest bankruptcy lawyers are still speaking with distressed consumers concerned about a variety of debt, including credit card debt, medical bills, and student loans.

In contrast, foreclosure filings recently have increased in the Chicago area.  In March, such filings jumped 18.5% from a year earlier and 1.8% from this February, according to an article in the Chicago Sun-Times.  Illinois is doing significantly worse than the nation as a whole in this area.  Nationally, the numbers dropped 17.1% from March 2011 and fell 3.9% from this February.  In 2012’s first quarter, our state had the nation’s third highest foreclosure total with 11,342 homes receiving filings.  Although the national foreclosure trends have been more positive so far this year than those in our home state, these trends are not expected to continue.  Increases in foreclosure filings are expected to increase as less and less mortgage paperwork will be tied up in courts inspecting the accuracy and authenticity of those documents in the wake of the robo-signing scandal.

The Vice-President of the Woodstock Institute, a Chicago-based policy and advocacy nonprofit, stated that “concerted effort” was necessary “to address the forces that drive foreclosure activity, such as negative equity and unemployment.”  Our Cook County foreclosure defense lawyers agree that many homeowners are still in jeopardy and feel hopeless in the face of foreclosure.  Much must still be done to help our faltering economy recovery, but in the meantime, if you are at risk of losing your home to foreclosure, please consider contacting a legal professional to discuss the number of options available to you.

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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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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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