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Are COVID-19-Related Financial Issues a Defense Against Foreclosure?

Posted on in Foreclosure

Lake Forest IL foreclosure defense attorneyAfter nearly a year, the COVID-19 pandemic is continuing to affect people across the United States. Even though vaccines are currently being administered, they are being rolled out slowly, and it will most likely be several more months before enough people can be vaccinated to allow a return to the activities that people enjoyed before the pandemic. Unfortunately, this means that those who have been struggling financially may continue to face difficulty and uncertainty for the time being. However, federal and state government organizations have offered a variety of different forms of relief, and programs may be available to help homeowners who have been affected by COVID-19 avoid foreclosure.

Foreclosure Moratorium Extended

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which went into effect in March of 2020, placed a moratorium on foreclosures and evictions for single-family homes with mortgages backed by the Federal Housing Administration (FHA). While this moratorium was initially intended to last through July 24, 2020, it has been extended several times as the pandemic has continued to affect people and families. Most recently, the FHA announced that the moratorium will extend through February 28, 2021. The moratorium applies to new foreclosure proceedings and any foreclosures which are already in process.

Options for Mortgage Forbearance and Bankruptcy

In addition to the moratorium on foreclosures, the FHA is allowing homeowners to request a forbearance from mortgage lenders. A forbearance will allow a homeowner to defer or reduce mortgage payments for up to six months, and it may be extended for an additional six months if needed. The Consolidated Appropriation Act (CAA), which was passed by the U.S. Congress on December 27, 2020, prohibited lenders from denying forbearances or foreclosure relief to lenders who had previously filed for bankruptcy or who are involved in bankruptcy proceedings.

While homeowners may currently be safe from foreclosure, they will eventually need to resume payments on their mortgages if they wish to keep their homes. In cases where a forbearance has been granted, mortgage payments will be due in a lump sum at the end of the deferral period. However, the CAA provides homeowners with the option to address this amount through Chapter 13 bankruptcy. If necessary, a debtor may modify an existing Chapter 13 repayment plan to include deferred mortgage payments. Additionally, debtors may still receive a discharge through Chapter 13 bankruptcy if they failed to make up to three mortgage payments due to COVID-19-related financial hardship. While mortgage debts typically cannot be discharged, a debtor may be able to discharge other debts, helping them become current on their mortgage payments.

Contact Our Lake County Foreclosure Defense Lawyers

If you are struggling to make ends meet during the pandemic, you will want to be sure to understand your options and the steps you can take to avoid losing your home. At Newland & Newland, LLP, our lawyers can help you defend against foreclosure, and we will work to ensure that you can use government programs to receive the financial relief you need. Contact our Libertyville bankruptcy attorneys at 847-549-0000 to arrange a free consultation today.





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