How Do I Choose Between a Short Sale and Chapter 13 Bankruptcy to Avoid Foreclosure?

The idea of deciding or choosing between a short sale and Chapter 13 bankruptcy might seem odd at first since you might not realize that both options are potential methods for avoiding foreclosure. Yet once you begin to learn more about foreclosure defense options, and ways of preventing foreclosure, you will learn that there may be multiple options available to you, and two of those options might include a short sale or a Chapter 13 bankruptcy filing. Both options are quite different from one another, aside from the fact that they can both allow a homeowner who is struggling with mortgage payments to avoid having a foreclosure on their record.

Our Oak Park foreclosure defense attorneys can explain more about short sales and Chapter 13 bankruptcy filings under the Bankruptcy Code, and we can clarify how these legal tools can allow you to prevent your home from going into foreclosure.

Short Sales Stop a Foreclosure, End Your Mortgage Debt, But Require You to Leave Your Home

When a homeowner is facing foreclosure, a short sale is a popular tool to stop foreclosure and erase mortgage debt, but it requires the homeowner to vacate the property. In other words, you cannot do a short sale and stay in your home.

What is a short sale? With a short sale, the homeowner finds a buyer who is willing to purchase the home for a price of less than what the homeowner currently owes on the mortgage. Then, the homeowner must get permission from the lender to move forward with the sale, and the lender must agree to take an amount that is less than what is currently owed on the mortgage. Typically, with a short sale, your lawyer will also work out a deal with the lender for the lender to forgive any remaining debt (i.e., the difference between the amount owed on the mortgage and the amount for which the property is being sold). A short sale does not damage a consumer’s credit nearly as much as a foreclosure while giving the debtor a way of preventing foreclosure.

Chapter 13 Bankruptcy Can Stop Foreclosure While Keeping You in Your Home

When should you choose Chapter 13 bankruptcy instead of a short sale? This is often a good option for homeowners who are eligible for this type of bankruptcy and who want to reorganize their debts. With a Chapter 13 bankruptcy, you can stop a foreclosure but also remain in your home and get caught up on your mortgage payments.

While a Chapter 13 bankruptcy might immediately seem like the most appealing option to remain in your home and avoid foreclosure, it is important to consider the effects of a reorganization bankruptcy case. You will need to abide by the terms of a repayment plan in this type of bankruptcy (which will last anywhere from three to five years), and you will need to take into account most non-exempt debt when making payments on this plan for an extended period.

Discuss Your Circumstances with an Oak Park Foreclosure Defense Attorney

If you are facing foreclosure, an experienced Oak Park foreclosure defense lawyer at our firm can discuss the pros and cons with you of a short sale or a Chapter 13 bankruptcy filing. Contact the Emerson Law Firm to learn more.




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Top Things to Know About a Short Sale to Avoid Foreclosure

Am I Eligible for an Option to Avoid Foreclosure?

Top Five Advantages of a Short Sale

Struggling to pay your mortgage and realizing that you could soon be facing foreclosure is an extremely difficult experience for any homeowner. Indeed, it can be devastating to recognize that you do not have options for staying in your home given the amount of debt you owe. There are a variety of options that could be available to you to avoid foreclosure, including a short sale. Our Oak Park foreclosure defense attorneys routinely help struggling homeowners with short sales in order to stop a foreclosure from happening, and we can provide you with more information about how a short sale might benefit you. In the meantime, the following are the top five advantages of a short sale.

1. Avoid Having a Foreclosure on Your Credit

One of the most obvious advantages of doing a short sale instead of foreclosure is that you will not have a foreclosure on your credit record or credit report. When a foreclosure happens, a consumer’s credit takes a significant hit, and it can be difficult to rebuild credit. While a short sale will still affect your credit, it will affect your credit significantly less.

2. You Will Have Greater Control Over the Process Than You Would in a Foreclosure

When you do a short sale, you will be able to have more control over the process and will be able to make plans to sell the home and to move into a new one.

3. You Can be Eligible for Another Mortgage Sooner

When a judicial foreclosure occurs, you may need to wait for up to eight years before you are eligible to get a mortgage. With a short sale, you can be eligible for a mortgage again on a much shorter timeline. Depending upon the type of loan you want to get, you may need to wait anywhere from two to four years before you are eligible again, according to Bankrate. That timeline is significantly shorter than if you lose your home to foreclosure.

4. You May Save Money

The costs associated with foreclosure can be high. According to Mortgage News Daily, the Joint Economic Committee of Congress estimates that the average cost of foreclosure to a homeowner is more than $7,000, while a short sale will incur minimal costs.

5. Less Stressful Than a Foreclosure

Given that you will have more control in a short sale than a foreclosure, and that you can begin rebuilding your credit in order to be eligible again relatively soon for a mortgage, a short sale is generally less stressful for the homeowner than a foreclosure.

Contact an Oak Park Foreclosure Defense Lawyer Today

If you are behind on mortgage payments and you are facing the possibility of foreclosure, you should get in touch with an Oak Park foreclosure defense attorney who can provide you with more information about your options. We can help you through the short sale process, which can be complicated, and we can also provide you with information about other foreclosure defense options, such as a deed in lieu of foreclosure. Contact the Emerson Law Firm to learn more about how we can assist you.


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How Can I Do a Short Sale?

How Can I Do a Short Sale?

If your home is currently at risk of going into foreclosure, or if you are unable to continue making your mortgage payments and want to take steps to avoid foreclosure, one of the options you might be considering is a short sale. It is important to understand that a short sale is different from a traditional home sale, and there are certain steps you will need to take if you want to do a short sale in Illinois. An experienced Oak Park foreclosure defense attorney at our firm can talk with you today about planning a short sale and moving forward with a short sale in order to prevent foreclosure. In the meantime, the following are the general steps you should be aware of when it comes to doing a short sale in the Chicago area.

Understand What is Involved in a Short Sale

Before you take any steps toward doing a short sale, it is essential to understand what is involved in the process. A short sale is generally for homeowners who have underwater loans and cannot make their mortgage payments. With a short sale, you will be entering into an agreement with your lender to sell your house for less than what you owe on the mortgage, and the lender will agree to accept the amount for which the house sells and, in most cases, forgive the remaining amount of mortgage debt. A short sale will impact your credit, and you will not be able to keep your home, but it will have less impact on your credit than if your house goes into foreclosure and is sold through a foreclosure sale.

Determine if You Need to Do a Short Sale

You should work with an attorney who can help you to determine whether a short sale is necessary. In most situations, it is possible to estimate the likely sale price of the house, and to account for the unpaid mortgage balance and any costs associated with the sale. If it looks as if you might still make any money from the sale or might come out even, a short sale is likely not necessary. If money will still be due after a sale of the house based on the estimated selling price, you may need to move forward with a short sale.

Contact Your Lender

Once you decide to move forward with a short sale, the first thing you will need to do is contact your lender. According to an article in The Balance, getting in touch with the right person can be difficult, and it often makes sense to seek help from a foreclosure defense lawyer immediately so that your lawyer can be in contact with the lender and negotiate the terms of the short sale.

Submit a Hardship Letter and Related Documentation

When you ask the lender to agree to a short sale and to forgive remaining debt, you will typically need to submit a hardship letter that explains your financial situation and why you are unable to continue making payments on your home loan. Along with a hardship letter, you will usually need to submit financial documentation to the lender, including information about any assets you have and copies of your bank statements.

Listing the House and Entering Into an Agreement

Finally, if the lender agrees to the possibility of a short sale, the house can be listed, you can submit a purchase agreement to the lender once you find a buyer, and the lender can approve the terms of the short sale.

Contact an Oak Park Foreclosure Defense Attorney Today

If you have questions about doing a short sale, one of our foreclosure defense attorneys in Oak Park can assist you. Contact the Emerson Law Firm to get started.


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How Do I Complete a Short Sale?

If your home is at risk of going into foreclosure, you may be able to avoid foreclosure by moving forward with a short sale. There are other options for avoiding foreclosure that may be available to you as well, but a short sale can allow you to sell your house and move on, ideally without owing anything to the bank in the future. Short sales are particularly helpful for homeowners who are struggling with underwater mortgages. While the real estate market remains a seller’s market in many parts of the country, anyone who purchased a home at the peak of the real estate market may be struggling to make payments on a property for which they paid a significant amount of money and for which the property would be likely to sell for a lesser amount in the present. For these homeowners, a short sale may be the best option.

If you are considering a short sale, how can you complete this process? Our Oak Park foreclosure defense lawyers can provide you with the information you need.

Learn About Short Sales

The first step in completing a short sale is to learn more about the process and what it entails. As a Bank Rate article explains, a short sale is the sale of a property that occurs “when a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner.” Then, in most short sales, the owner enters into an agreement with the lender that it will forgive any amount remaining on the mortgage so that the owner can walk away without owing the bank any additional money.

To clarify, let us give you an example: A homeowner purchased a property for $500,000 and has a mortgage payment of approximately $2,400 per month. The homeowner is struggling to make that monthly mortgage payment and is behind on the loan by numerous months of payments. The homeowner wants to avoid a foreclosure, but the property has recently been appraised at only $300,000, and the homeowner still owes $400,000 on the original loan. With a short sale, the bank can agree to accept $300,000 and to forgive the remaining $100,000 the homeowner owes on the loan.

Work With an Attorney to Obtain Approval From Your Lender

Once you understand how the short sale process works, you can begin by working with your foreclosure defense attorney to obtain approval from your lender to complete a short sale. Once your lender approves, then you can move forward by listing the property as a short sale with a real estate agent who has experience handling short sale properties.

Get an Offer

Next, you will need to find a buyer who is interested in the property and who makes an offer. Properties that are sold as short sales are sold on an as-is basis, so some homebuyers may not be interested in making an offer or may not be able to secure funding to purchase the property.

Present the Offer to the Lender

Once you have an offer, you will need to submit the information to the lender, who will need to approve of the sale price and the other aspects of the sale.

Contact an Oak Park Foreclosure Defense Attorney

If you have questions about completing a short sale to avoid foreclosure, an Oak Park foreclosure defense lawyer at our firm can assist you. Contact the Emerson Law Firm today.



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Benefits of a Short Sale Instead of Foreclosure

Short Sale or Chapter 7 Bankruptcy?

Benefits of a Short Sale Instead of Foreclosure

If you are facing foreclosure after getting far behind on your mortgage payments, you might be considering certain options to avoid foreclosure even if you cannot remain in your property. While your ultimate goal at the start might have been a foreclosure defense option that allowed you to get back on track with your mortgage payments, you may have reached the point at which you are realizing that you will need to move out of your home and find a new place to live. In such situations, you might be asking yourself if there is really any benefit to going through a process to avoid foreclosure such as a short sale or a deed in lieu of foreclosure. In other words, you might be thinking it could make more sense to simply allow the foreclosure to happen. Our Oak Park foreclosure defense lawyers want to explain the many and varied benefits of a short sale instead of a foreclosure.

You Can be Eligible for Another Mortgage Much Sooner

By going through a short sale instead of allowing the foreclosure process to continue, you can be eligible for another mortgage much sooner. Having a foreclosure on your credit can be extremely damaging, and you should take steps as soon as possible to avoid it. As the Federal Trade Commission (FTC) explains, if your home goes into foreclosure, you will likely need to wait for seven years before you are eligible for another mortgage. However, if you have a short sale instead, you may be able to qualify for a mortgage again in just five years.

Shorts Sales Do Not Affect Your Credit as Much as Foreclosures

Short sales are much less damaging to your credit than foreclosures, which means you will be able to rebuild your credit much faster with a short sale instead of a foreclosure. Indeed, as we noted above, you may be able to get another mortgage in as little as two years if you work with a lawyer on a short sale instead of simply letting the foreclosure happen.

You Will Have More Control of the Process

Learning that your home is going into foreclosure can be extremely stressful, and most homeowners feel completely out of control in the process. By choosing to move forward with a short sale and avoiding foreclosure, you can also ensure that you have more control over the process. Although you will still need to work with a lawyer to engage in negotiations and to ensure that all documents are appropriately filled out and filed, you will not need to go through the more emotionally arduous process of a foreclosure.

It is important to recognize that having some control in the short sale process also means that you can work with your lawyer to ensure that the bank waives plans for a deficiency judgment so that you will be free and clear once the house sells.

Contact an Oak Park Short Sale Lawyer Today

If you have questions about short sales, or if you need assistance with foreclosure defense in Illinois, one of our dedicated Oak Park foreclosure defense attorneys can speak with you about the benefits of short sales. Contact the Emerson Law Firm today to learn more about how we can assist you.



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Is a Short Sale Better Than a Foreclosure?

Many homeowners in Oak Park, Illinois are getting to the point at which the foreclosure crisis no longer feels like a threat as neighborhoods throughout Chicagoland continue to recover. However, many homeowners continue to face foreclosure, and a lot of those individuals do not understand their options when it comes to foreclosure defense and methods for keeping their home. In some cases, foreclosure avoidance tactics allow the homeowner to keep his or her house, while in other cases, they do not.

A recent article in Forbes discusses the difference between a short sale and a foreclosure. We want to say more about whether a short sale is better than a foreclosure, and to provide more information about other ways of avoiding owing money once a short sale goes through.

What is a Short Sale?
Many homeowners are confused about the distinction between a short sale and a foreclosure. They do have certain similarities, with the most obvious being that both a short sale and a foreclosure result in the homeowner losing the property. However, a short sale can be much better for your credit. A short sale, importantly, is not foreclosure. As such, it is a way of avoiding foreclosure.

So what is a short sale? As the article explains, a short sale is a type of sale that involves selling your house for a total price that is less than what you owe on your mortgage. For instance, if you purchased your home at the height of the market for $500,000, it may have declined significantly in market value since then. As a result, with the mortgage payments you have already made, let us say you still owe $475,000 on the mortgage. However, with the current market, your home is valued at only $400,000. You are able to find a buyer for that amount, but it leaves you with a deficit of $75,000. Since “you are technically coming up short” by $75,000, this type of sale is known as a short sale.

Other than the shortfall, a short sale works much like any other home sale. Many homeowners work with real estate agents and advertise the property in the same way they would another house. However, the bank has a final say in who gets to buy the house in a short sale.

Why is a Short Sale Usually Preferable to a Foreclosure?
When a homeowner completes a short sale, the expectation is usually that the bank is going to forgive the remaining amount of debt. In the example above, the bank would be forgiving the $75,000 that the homeowner still owes on the mortgage. In some cases, however, the bank tries to recoup the money.

As the article clarifies, some short sales result in the mortgage lender filing a “deficiency judgment” against you in an attempt to obtain the “shortfall” amount from the sale. In the example given above, the lender might seek a deficiency judgment for $75,000. While some states do not allow mortgage lenders to file deficiency judgments in these circumstances, Illinois law does allow for deficiency judgments after a short sale, but there are ways to avoid them.

If the short sale agreement between the homeowner and the mortgage lender expressly states that the mortgage lender is giving up its right to seek the “shortfall” amount, the lender cannot file a deficiency judgment. Even if the lender will not agree to this type of clause, it is important to know that the lender will not automatically receive a deficiency judgment. Rather, the mortgage lender will need to file a claim, and the court will need to award the deficiency judgment. Under Illinois law, deficiency judgments are prohibited after a deed in lieu of foreclosure, and they are permitted after a foreclosure.

Contact an Oak Park Foreclosure Defense Attorney
If you have questions about short sales, avoiding foreclosure, and deficiency judgments, an Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm today for more information.



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Housing Market On the Rise in the Chicago Area?

We all know about the housing market crash and the devastating number of foreclosure filings across the country.  We’ve also reported on news that the real estate market has begun to show strong signs of recovery.  It’s clear that we haven’t reached a point at which foreclosures aren’t a problem.  Indeed, many families in Illinois continue to have difficulty making monthly mortgage payments, putting them at risk of foreclosure.  However, some commentators have begun to look ahead, speculating about the rising real estate market in Chicago and the Midwest.

A recent article in the Chicago Tribune suggests that housing recovery in the Chicago area might look a little bit different than we might imagine.  Rather than return to “the olden days of the housing boom” in which builders were eagerly “throwing up McMansions in the distant suburbs,” researchers suggest that new building and buying trends may fall closer to the city center.  According to Lance Remella, a researcher at John Burns Real Estate Consulting who tracks the housing markets in Chicago and the Midwest, “the race is on for land in nearer-in locations.”  As a result, buyers might have to pay higher prices than they’d expect.

The intricacies of the housing market can be daunting for first-time buyers and for families who are having trouble making their mortgage payments.  If you have concerns related to real estate and avoiding foreclosure in the Chicago area, the experienced attorneys at the Emerson Law Firm can answer your questions today.   

More Jobs, More Real Estate Buying

While many commentators worry that employment numbers remain low and foreclosures continue to occur, Ramella insists that there are “enough jobs to indicate better days ahead.”  Even though the jobs in Chicago aren’t growing at the same pace as some other states, it’s still increasing by 1.5 percent, and according to Ramella, the Chicago area has “added 60,000 jobs—which isn’t setting the world on fire, but it’s a slow, steady growth.”

Indeed, commentators expect the job growth rate to continue to increase in the Chicago area, with 1.6 percent by the end of 2013, 1.9 percent by the end of 2014, and 2.1 percent through 2015.

If Ramella is correct, then the number of jobs added in the next couple of years means that the Chicago real estate market will be “completely undersupplied with new housing.”  By the end of 2015, foreclosure rates are expected to drop, and more families who once experienced difficulty making mortgage payments might be able to invest again in homeownership.

And although household income growths aren’t likely to get anywhere near “back to normal” until 2016 according to market researchers, household incomes continue to increase as the market rebounds.

In fact, by the end of 2013, researchers predict that the “price appreciation for resale homes will increase by about 4 percent.”  According to Ramella, prices will increase by 11 percent in 2014, which means that metropolitan Chicago will “see double-digit appreciation coming for the next two years.”

The housing crisis isn’t over, but the continued news about the recovering market suggests that we may see a return to normalcy within the next several years.  However, many families in the Chicago area continue to struggle with monthly mortgage payments and fears about foreclosure.  An experienced lawyer can answer your questions when it comes to avoiding foreclosure or the intricacies of the housing market in our area.  Contact us today for more information.

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Loan Modification Plans May Be Falling Short

The federal government is expanding its mortgage loan modification program, but it may be too late to bring relief to struggling homeowners.  Started back in spring 2009, the U.S. Treasury Department’s Home Affordable Mortgage Program (HAMP) doesn’t seem to be living up to its hype.  A Huffington Post report emphasizes that when the program was introduced, President Obama “promised to help 3 million to 4 million borrowers” through loan modifications that would restructure their mortgages in order to lower monthly payments and prevent foreclosure.  Yet according to an article in North Jersey News, this program “has fallen well short of its goals.”  As of January 2013, nearly $30 billion funds have been allocated for homeowner assistance programs and only $2.3 billion have been spent.  Further, only about one million mortgages have been permanently modified under the plan, compared with 4.8 million loans modified through private programs.  Despite these problems, the government is creating new guidelines in another attempt to help homeowners keep their homes.

Why Hasn’t the Modification Plan Been Effective?

According to many homeowners, the program is too strict.  One New Jersey woman indicated that she and her family were turned down three times for a loan modification through HAMP.  David Stevens, a former housing official in the Obama administration, indicated that the program has tough guidelines in order to ensure that funds aren’t spent on homeowners who plan to abuse the system.  Others cite different problems for the failures of HAMP.  For example, a lawyer at the National Consumer Law Center indicated that the problem lay with mortgage servicers, who weren’t interested in taking on the added expenses associated with loan modifications.  Some advocates blame the federal government, arguing that mortgage servicers should have been legally required to do loan modifications instead of simply being encouraged to do so with incentives.  Strikingly, the government-owned “mortgage giants” Fannie Mae and Freddie Mac have never been required to forgive mortgage debt, and new changes to HAMP won’t address this problem.

However, advocates for HAMP indicate that it has had a positive effect that certain consumer advocates overlook.  Andrea Risotto, a U.S. Treasury spokesperson, said that the government program opened more doors for borrowers to keep their homes than ever before, and that on average, homeowners who received HAMP loan modifications now save a median $544 per month.  Some consumer advocates agree, pointing out that loan modifications through HAMP have steadily increased in number since its creation in 2009, and that the program still has a chance to meet its goals by the end of 2013.

What are the New Changes and How Can They Help You?

Starting in 2013, the Treasury Department will pay Fannie Mae and Freddie Mac the same loan modification incentives as banks.  Although Fannie and Freddie won’t be required to do loan modifications, these incentives should lead to more of them in 2013.  More significantly, the government has extended HAMP for an extra year.  When the program was established in 2009, it was set to expire by the end of 2012.  Now, the federal government has until the end of 2013 to meet the goals it originally laid out.

Additionally, the eligibility guidelines have “been relaxed” in order to help more homeowners.  While HAMP initially was limited to homeowners whose mortgage payments “took at least 31 percent of their total monthly income,” the new guidelines permit homeowners with more affordable mortgage payments to qualify for assistance.  

Are you behind on your mortgage payments and risking foreclosure?  You may qualify for a loan modification or other assistance.  A foreclosure attorney can help with your options.

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I’ve Got Multiple Mortgages, Can I Still Short Sell?

The Oak Park and River Forest short sale lawyer at our firm often fields questions from clients trying to get help with mortgage problems.  We often explain that a “short sale” is a helpful tool whereby those struggling to pay a mortgage can deal with the problem without the need to go through the entire foreclosure process. In fact, a short sale is possible even when one has two (or three!) mortgages on a single home.  It is not easy and can get complicated, but a competent legal professional in the area can help you get it done.

Short Selling with Multiple Lenders

A short sale involves a homeowner working out an agreement with a bank to sell the home to a third-party for less than the total debt due on the home.  Many local residents were severely hurt in the recent recession—through no fault of their own—and found their house value plummet.  The short sale then, is an important way to escape from underwater homes.  When multiple lenders have a lien on the property, however, each lender must sign off on the short sale.  For example, if you took out a second mortgage on your home, both lenders would have to consent to the short sale before it could go through.

Some local resident might worry that getting two lenders to agree might pose a complication.  Of course, it is always a possibility that one of the lenders might hold up the process or put an end to it entirely.  Yet, our Cook County short sale attorneys understand that in some situations lenders are growing more eager to approve short sales.  Getting multiple lien holders to agree on a sale is not an insurmountable barrier.

For one thing, junior lien holders may have clear incentives to approve a short sale.  The junior lien holder is usually the second (or third) lender.  These lien holders often have little to gain via a foreclosure.  In a foreclosure, whoever holds the first mortgage gets first priority.  There is rarely any money left over for junior lien holders, and they may end up with nothing.  A short sale may prevent this

Last week news broke regarding changes in policy that will likely make short sales move along more quickly.  Federal regulations now require Fannie Mae and Freddie Mac to give short sale buyers a decision within two months.  This represents a big improvement and will make the short sale process more feasible for many local residents—including those who have multiple mortgages.

Dealing with foreclosure, the threat of foreclosure, or an underwater home can be a stressful, lonely time.  But resident should never forget that legal options exist to help them out of the situation.  The first step for those in our area is visiting with a local Cook County real estate lawyer to learn what is available in your case.  There is nothing to lose from learning more from legal professionals who have experience navigating all of these short sale and foreclosure complexities. 

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