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IL debt attorneyIf you are significantly behind on your mortgage payments, you probably have some options available to you through your lender. Your lender might be willing to work with you by modifying your loan or setting up a plan through which you can get caught up on your payments. This all sounds good, but what happens if your mortgage is not the only obligation you are behind on? Many people who are delinquent on their house payments are also struggling with other types of debt too.

In some cases, the debt issues are so problematic that foreclosure becomes an imminent possibility. If you have received notice that your lender intends to foreclose on your house, you need to take action in order to save your home.

The Automatic Stay

When you file for financial protection under the United States Bankruptcy Code, the bankruptcy court automatically issues an immediate stay on all debt collection and enforcement activities pertaining to you. This means that creditors cannot call you or send you letters while your bankruptcy case is active. The stay also applies to foreclosure proceedings. Once the stay is issued, your lender must pause your foreclosure case or risk being sanctioned by the bankruptcy court. Keep in mind, however, that the stay simply pauses the proceedings. It does not make stop the foreclosure permanently.

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IL real estate lawyerIf you are struggling to make your mortgage payments, the threat of losing your home can be a terrifying thought. Once a mortgage is in default, the lender can sue to have the right to sell the property in what is known as a foreclosure sale. In 2021, lenders initiated more than 92,000 foreclosures—the lowest number in many years. In fact, 2009 saw more than 2 million foreclosures initiated by lenders looking to resolve defaulted mortgages. If you are facing the potential foreclosure of your home, you should be sure to understand the procedures that will be followed and the legal options available to you.

The Foreclosure Process

When a mortgage has not been paid for several months and has fallen into default, a lawyer from the lending institution may begin a lawsuit by filing a complaint in court. After that, a summons and complaint are delivered by a process server or a sheriff. The summons is a notification of a court hearing, and it will specify when and where the hearing will be held. Within 30 days of receiving the summons, you must either file an answer and court appearance or a motion of your own.

During the hearing, the bank’s lawyer will update the assigned judge regarding the status of the property. At this time, you may be able to request mediation, during which you and a representative of the lender will meet with a mutual third party to discuss loss mitigation. This means that options other than foreclosure can be discussed, and you may be able to work out an arrangement that will allow you to stay in the home through solutions such as a repayment plan or loan modification. There are also options in which you may be able to sell the home without going into foreclosure.

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Gurnee Bankruptcy LawyerHomeowners who have encountered financial difficulties may be unable to make mortgage payments while also paying other debts and covering their ongoing expenses. If a person defaults on their mortgage by missing one or more payments, they may receive a notification from their lender stating that if they do not address this issue, the lender will begin foreclosure proceedings. In these situations, a homeowner will want to understand whether there are any options that may help them avoid losing their home. In some cases, bankruptcy may be used to address an impending foreclosure or put a halt to foreclosure proceedings that have already begun. 

How Bankruptcy Will Affect a Foreclosure

When a homeowner files a bankruptcy petition, an automatic stay will apply to their case. This stay will prevent creditors from taking any actions to collect debts, and they must cease any collection proceedings that have already been initiated. The automatic stay applies to foreclosure proceedings, and it will prevent a lender from beginning the foreclosure process or stop them from putting a home up for auction or attempting to evict the homeowner from the property.

While the automatic stay will provide a homeowner with some breathing room, it will not be a permanent solution. As the homeowner proceeds with the bankruptcy process, they can determine their best options for addressing their past-due mortgage payments, becoming current on their loan, and ensuring that they will be able to make ongoing payments.

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Grayslake Foreclosure Defense LawyerOriginally published: July 19, 2019 -- Updated: November 8, 2021

UPDATE: A consent foreclosure, as described below, may be a beneficial way for a person to relinquish ownership of their home and avoid a deficiency judgment. However, homeowners who are considering a consent foreclosure should be sure to understand how this will affect their credit. The completion of a foreclosure will be included in a person’s credit report, which could affect their ability to secure a mortgage in the future. If this will be a concern, a homeowner may need to determine whether completing a short sale or using a deed in lieu of foreclosure will be a more beneficial option.

Homeowners should also understand how junior liens such as a second mortgage or home equity line of credit may affect their ability to complete a consent foreclosure. A consent foreclosure will remove all liens from the title of the home, and a mortgage lender will waive their right to pursue a deficiency judgment to collect any additional amounts owed on a mortgage. All lenders who have an interest in the property must consent to this type of foreclosure. Because junior mortgage lenders may not be able to recover what is owed, they may object to a consent foreclosure. If objections prevent a homeowner from completing a consent foreclosure, they may need to consider other options. In some cases, a judicial foreclosure may be completed, and a person may need to file for bankruptcy to address deficiency judgments by one or more mortgage lenders.

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Waukegan Mortgage Relief AttorneyAnyone can encounter financial problems that affect their ability to meet their obligations. Homeowners who are struggling to pay bills may be concerned about what will happen if they get behind on their mortgage payments. Those who are worried about the possibility of foreclosure will want to understand their options, and in some cases, they may qualify for mortgage relief through the Flex Modification Program. 

Eligibility for the Flex Modification Program

To determine whether they qualify for the Flex Modification Program, homeowners will need to understand who owns their loan. This program is available for mortgages owned or guaranteed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). While a mortgage may have originated with a bank or another private lender, many mortgages are sold to other investors, including Fannie Mae and Freddie Mac. While these loans may then be sold to another investor, they will often be guaranteed by Fannie Mae or Freddie Mac, allowing homeowners to take advantage of relief through the Flex Modification Program.

To qualify for the Flex Modification program, a homeowner will need to meet certain requirements. The mortgage must have originated at least one year prior to being evaluated for relief, and a loan must be a conventional first mortgage, giving the lender the right to be repaid first if a foreclosure sale is completed. A homeowner may seek relief if they are more than 60 days delinquent on mortgage payments, although if the property is the homeowner’s primary residence, they may seek relief if they are current on mortgage payments or are less than 60 days delinquent, including in cases where a lender determines that they are in “imminent default” and will no longer be able to make monthly mortgage payments based on their financial circumstances. While a homeowner will usually be required to provide documentation of financial hardship, proof of income, and other information, those who are more than 90 days delinquent may qualify for streamlined procedures that will allow them to receive a modification more quickly and with fewer documentation requirements.

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