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Libertyville IL foreclosure defense lawyerOver the past decade, the threat of foreclosure has been ever-present for many homeowners. Those who are struggling financially may be concerned that missed or late mortgage payments will result in the loss of their home. However, many homeowners who have refinanced their homes or obtained additional mortgages may be unsure about how these loans will affect their financial situation, including whether mortgage lenders may foreclose if a person is in default on a second mortgage. By working with a bankruptcy attorney to understand these issues, homeowners can determine their best options for defending against foreclosure and managing their debts.

Defaulting on a Second Mortgage

A mortgage is a secured debt, and this means that if a homeowner defaults on the debt, the lender can foreclose and repossess the house. This is true not only for the initial mortgage on a home, but also for any subsequent mortgages or home equity loans. However, during foreclosure, the first mortgage will take priority, and lenders of second or subsequent mortgages will only receive payments if the amount obtained through a foreclosure sale exceeds the amount owed on the first mortgage.

If a home is “underwater,” meaning that its current value is less than the amount owed on the initial mortgage and any subsequent mortgages, lenders may not want to foreclose on a second mortgage, since they will likely not receive full payment of the amount owed. However, these lenders may pursue other options for repayment, such as filing a lawsuit against the homeowner to collect the amount owed. In many cases, homeowners may be able to negotiate with these lenders to determine how they can become current on a loan, since other options may not be financially beneficial for the lender.

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Waukegan foreclosure defense lawyerDebt is a major problem for many American families, especially during difficult times such as the COVID-19 pandemic. If you have lost your job, are facing large medical bills, or are struggling to make payments on the debts you owe, you may be concerned about the possibility of foreclosure on your home. Fortunately, bankruptcy may provide your family with some relief by allowing you to discharge or repay certain debts without losing your home.

Automatic Foreclosure Stay During Bankruptcy Proceedings

When you file for bankruptcy, an automatic stay will go into effect preventing creditors from attempting to collect on the debts you owe. This stay applies to mortgage lenders and foreclosure proceedings. If a bank has begun the process of foreclosing on your home, filing for bankruptcy can put a halt to these proceedings while you determine the best steps to take to regain financial security while keeping your home.

Chapter 7 or Chapter 13 Bankruptcy and Your Mortgage

A Chapter 7 bankruptcy is known as a “liquidation bankruptcy,” since all non-exempt assets you own will be sold to make payments to your creditors, and any remaining debts will be discharged. Chapter 7 bankruptcy can help you delay a foreclosure, but if you discharge the amount owed on your mortgage, in many cases the lender can still eventually foreclose on your home. However, if you do not discharge your mortgage debt, and you remain current on your mortgage payments, Chapter 7 bankruptcy may allow you to discharge other debts and give you the financial means to stay in your home.

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Lake County foreclosure defense attorneysFor most people, it is not very hard to imagine a scenario in which they cannot afford to pay all of their bills. Maybe it starts with a missed auto loan payment or a monthly credit card payment, but all too quickly, a person is so far behind that it catching everything up might be impossible—especially catching everything up at the same time. In many cases like this, the person’s best option may be to file for Chapter 13 bankruptcy.

If your mortgage is one of the obligations on which you have fallen behind, you probably realize that your lender may soon have the right to foreclose on your home. In fact, depending on the circumstances, you might have already received notice that foreclosure proceedings have begun. Once foreclosure proceedings begin, you might be inclined to simply stop paying your mortgage, but if you have filed Chapter 13 bankruptcy, doing so could cause you more problems than it solves—especially if you hope to keep your home.

Automatic Stay in Bankruptcy

When you file for protection under Chapter 13 of the United States Bankruptcy Code, the court will automatically issue a stay on all debt collection activities—including efforts by your lender to collect your delinquent payments. The automatic stay also stops foreclosure proceedings. Your lender, however, can request permission from the court to continue the foreclosure. The court has the discretion to grant the lender’s request, but certain circumstances will make the court more likely to approve allowing the foreclosure to continue.

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Illinois Bankruptcy: Chapter 13

Bankruptcy creates a ripple effect that touches many beyond the people and companies that file. It is best to thoroughly understand the process of bankruptcy to know what to do when encountering it as a consumer of a company that has filed for bankruptcy, as a friend or loved one of someone who has filed for bankruptcy, or as the person person filing him or herself.

Companies and individuals can file bankruptcy when they have acquired too much debt. They file a petition, which includes all debts and assets, for bankruptcy with the U.S. Bankruptcy court. Most people require the assistance of a bankruptcy lawyer because the process can be tricky, especially when deciding which of the three types of bankruptcy to file.

Chapter 13: Wage Earner Plans

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Understanding The Bankruptcy Feedback Loop

A recent piece published in The Atlantic describes a phenomenon it dubs “the bankruptcy feedback loop.” This is the cycle of impoverished individuals filing for bankruptcy to eliminate their debts only to find themselves back in debt not long after, considering filing for bankruptcy again. For many of these individuals, debt is a generational problem and the goal of being comfortable financially appears to be too far away to actually achieve.

The piece illustrated the story of one Memphis woman who filed for Chapter 13 after one of her creditors won a judgment against her and wage garnishment was set to begin. The piece reported that Memphis is the bankruptcy capital of the United States and that black filers, who comprise most of the bankruptcy filers in Memphis, are less likely to achieve debt relief through bankruptcy than white filers. In 2015, half of the black individuals who filed for Chapter 13 in the United States Bankruptcy Court for the Western District of Tennessee had filed for Chapter 13 at least once more in the previous five years. Although Chapter 13 is an attractive option for many because it often does not require the filer to put down any money up front, it is often more expensive than filing for Chapter 7 in the long run.

Chapters 7 and 13 are More than Just a Different Set of Requirements

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