Tag Archives: home foreclosure

Are short sales worth the risks and is bankruptcy a better option?

 

When bad things happen to good people homes may fall into foreclosure. In too many cases, houses are not worth what the owner owes on the mortgage. This is common with people who bought their homes before the recession when prices were high. If the lender forecloses on the house it will be sold to the highest auction bidder. If the house sells for less than is owed, there may be an opportunity for the lender to sue and collect the deficiency judgment, or balance due after foreclosure. If the market is flooded with foreclosure homes, they could be sold off for significantly less than they would be worth in a healthier economy and real estate market. As foreclosure sales created more financial damage to many, the alternative method of short sales became more popular, giving homeowners an easier way out of their mortgages.

While short sales allow is a sale of your home to a new homebuyer for less money than you owe on your mortgage. If the lender bank agrees to a short sale deal, you may sell the house and be released from the mortgage lien and may go on your way to rent or purchase a more affordable home. While this sounds like a dream come true, there may be a few catches.

Here is a short list of considerations when you have the option to short sell your home:

  1. The lender bank and decision maker on your mortgage has no duty to accept a short sale deal. When you owe the money, you owe the money, plain and simple. The bank may be motivated to do a short sale if the market is flooded with upside down deals and the home is likely to sell under value at auction. Instead of fighting to then also collect the deficiency judgment against you, a lender may be more likely to work with you on a short sale deal, to get the house sold for fair market value.
  2. Even if the bank allows the short sale deal, they may not operate at the speed of business and it may be easier to lose buyers who cannot wait for a slow-moving lender bank. If the lender has a large volume of short sale deals, it may be even more difficult to get things done in a timely manner. Losing buyers and increased aggravation are possible in many short sale deals.
  3. Deficiencies are also possible with short sale deals. Even if you get more money for your house in a short sale, the amount you owe may still leave you short. It is a good idea to have a financial advisor assist you with your options to see what makes the most sense. If the short sale is still going to leave you high and dry, it may be better to proceed with a simpler foreclosure.

Short sales are long and complicated. There are more people involved in the transaction, more tax implications, more chances for something to go wrong. The more complicated the process, the easier it is for people to get frustrated and walk away from a deal.

Why would bankruptcy be a better option?

Depending on a review of your financial situation, a Chapter 7 or Chapter 13 bankruptcy may help you keep your home and avoid foreclosure. If you know you are badly upside down on your home and want to get out of your mortgage regardless, a bankruptcy can help you wipe out the amount of the deficiency judgment and give you a fresh start.

Depending on what you owe, how much you own and your income, a Chapter 7 full discharge will stop your bill collectors and wipe out all your dischargeable debts. If you do not qualify for a Chapter 7, a Chapter 13 reorganization bankruptcy will allow you to pay back a fraction of your debts over a three to five-year period, which may help you stay in your home and avoid making the foreclosure versus short sale decision.

About us: Joseph Wrobel, Ltd., works with clients to find out if they qualify for Chapter 7 or 13 bankruptcy, and their options and rights under the law. The firm will also advise and assist clients with questions and concerns about the collectors and their rights to pursue you.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

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Five common reasons people in Chicagoland might file a bankruptcy petition

The United States Bankruptcy Court for the Northern District of Illinois has an interactive website listing near-live information about current filings with the bankruptcy court. For example, today, the 19th of August, there were 61 Chapter 7 and 40 Chapter 13 bankruptcy petitions filed as of 1:50 p.m. The total amount of filings for the current year to date are 33,009 (compared to 2013 at this time and date when there were 35, 927 filings). The website also allows you to search by the top city accounting for the largest number of bankruptcy filings. If you guessed Chicago was number one, you are correct. Chicago residents have filed 12,698 bankruptcy petitions this year. Following with much smaller numbers are Rockford, Aurora, Joliet, Plainfield, Calumet City, Elgin, Bolingbrook, Waukegan and Naperville.

Why are so many people filing for bankruptcy protection?

Of course, every individual and family who files for bankruptcy has a unique reason and need for relief from bill collectors and legal actions by creditors. Some people even spend more money they cannot afford in debt relief programs that do not pull their participants out from behind all the bills they cannot pay. At any given point, your life and financial circumstances can change drastically. If you are not wealthy and do not have a safety net, you might take advantage of bankruptcy protection. Below are a few of the circumstances in which people decide to file for bankruptcy.

  1. A medical emergency can cause an individual to file for bankruptcy.

Imagine you are driving to work and are hit by a big truck. Many people only carry the state minimum required insurance coverage and some people have no insurance. If the insurance policies do not pay or the amount of your medical bills exceeds the policy limits, you might have a big financial problem on your hands. Yes, a personal injury suit might make you whole, but that could take years and the bills still come due while you wait, and you might not be working.

  1. The loss of a job can devastate a family’s budget, sending them into bankruptcy.

Many Americans filed for bankruptcy when our country plunged into recession in 2008 and beyond. Economic recovery can be slow and when jobs are lost, people can sink deeply into debt, sometimes beyond recovery. Unless that new job pays a sports hero salary, you may consider eliminating debt you will never likely be able to repay after being out of work for a sometimes extended period of time.

  1. Wage garnishment can trigger an interest in bankruptcy relief.

When a creditor obtains a money judgment against you, they can file a wage garnishment and send that to your employer who is ordered to withhold money from your paycheck and pay it to the creditor. While many Chicagoland families live on a tight budget, the reduction in a paycheck can mean the difference in keeping the lights on. A bankruptcy filing can stop a wage garnishment and you may be able to eliminate the underlying debt.

  1. Banks foreclosing on your home can lead to a bankruptcy filing.

Sometimes life’s hassles and expenses cause us to fall behind on the mortgage. A sick child or a surprise transmission repair can cause a family to slip one month, then maybe two. By that point, it can be nearly impossible to bring the mortgage current. A Chapter 13 bankruptcy may help you keep your home and put other creditors on hold while you get caught up.

  1. Relentless creditors and stress from debt can drive a person to seek bankruptcy help.

When creditors know they can call and bug you until you pay, they can and will. The stress of not being able to pay bills is awful. Too many people turn to the bottle or worse when facing debilitating stress. When they file for bankruptcy, the automatic stay provision kicks in and those creditors can no longer ruin your day, or they will be violating federal law.

If one of the above scenarios is all too familiar, we can help you make the determination if bankruptcy protection is right for you. Joseph Wrobel, Ltd. has convenient offices located all over the Chicagoland area for your convenience. Our new contact us page has address and map directions to our offices in: Chicago; Deerfield; Gurnee; Naperville; Orland Park; Schaumburg; Skokie; St. Charles and Westchester.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’sFacebook page and Follow Joseph Wrobel. Ltd. onTwitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.