Chicago Bankruptcy Question: Do I have options other than bankruptcy if I am behind on my mortgage?

Chicago Bankruptcy Question of the Day:  Do I have options other than bankruptcy if I am behind on my mortgage?  This is America; of course you have options other than bankruptcy if you are behind on your mortgage.  You must, however, be very careful when exploring these options.  There are a lot of unethical people out there who promise the world, take your money and give you little to no benefit.  The mortgage company has very good attorneys on their side; make sure that you have a very good consumer rights attorney on yours.

If you are trying to save your property and do not want to or cannot file for Chapter 13 bankruptcy, you have a variety of options at your disposal:

Loan Modification Assistance:  In this process, your attorney attempts to negotiate a deal with the mortgage company to bring you current on your mortgage, reduce your mortgage payment and reduce your interest rate.  This is a long and detail oriented process, so you want to make sure you have an experienced loan modification attorney working on your behalf.

Foreclosure Defense:  If you have already received a foreclosure summons, attempting a loan modification is risky.  Often people try to negotiate a loan modification while in foreclosure, only to have the home sold in the foreclosure while they are waiting for a deal to come through.  In a foreclosure defense, your foreclosure defense attorney actually goes into state court to fight the foreclosure, stalling it out and pushing the mortgage company to come to the table with a deal and stop the foreclosure.

Forbearance Agreement Negotiation:  A forbearance agreement is simply a repayment plan set up with the mortgage company wherein the mortgage company agrees to hold off on foreclosure while giving the borrower an opportunity to catch up on their mortgage through a structured repayment plan.  this is an excellent option if the borrower hits a short-term bump in the road, but are now on sound financial footing again.

If you are not trying to save the property, but are worried about the debt owed on the mortgage after the property is foreclosed upon, you again have a variety of options at your disposal:

Deed in Lieu of Foreclosure:  A deed in lieu of foreclosure is a process by which you basically deed the property back to the mortgage company.  This must be negotiated by and experienced attorney; otherwise the mortgage company may still be able to pursue you for any remaining debt in a collection lawsuit or issue you a 1099 for debt forgiveness income, resulting in serious tax consequences.

Short Sale:  This is where you sell the property to a third party for less than what is owed on the mortgage.  The mortgage company must consent to a short sale and this consent should be negotiated by an experienced consumer rights attorney.  If it is not, the mortgage company will be able to pursue you for any debt remaining, known as the deficiency balance, or again issue you a 1099 for debt forgiveness income.

The bottom line is that bankruptcy is not your only option, but you need to consult with an experienced attorney to determine which option is best for you and to ensure that you are properly represented in the process.  The experienced attorneys at Ledford & Wu are happy to give you a free consultation, explain all of your options and recommend a course of action.

No Comments

Leave a comment
Comment Information

Need Help With A Specific Issue?