BANKRUPTCY & FORECLOSURE

Chapter 7 Bankruptcy coupled with a Foreclosure:

This subject can be argued for different reasons and one obvious issue is how it affects your credit. If you filed a Chapter 7 Bankruptcy before you were served with your pre-foreclosure summons then you’ve delayed the foreclosure process on your home, but probably only for 60 days or so. Eventually your lender’s attorney will request to lift the stay of bankruptcy because you have no equity in your home or the financial ability to keep it. You’ve also removed the risk of a “Deficiency Judgment” on your mortgage or mortgages unless you have other investment properties; but you haven’t removed the risk of a “Foreclosure” on your credit report and this is an urgent issue for you to think about.

At some point during your interview with the trustee, or your Bankruptcy Attorney, the attorney may suggest that you “Surrender your home” to the lender. This is a mistake! Surrendering your home is a foreclosure regardless of what language it’s being interpreted in. Now you’ve got a bankruptcy and a foreclosure on your credit report and life just got tougher for you for the next 10 years. The real problem is that you don’t realize how damaging this is to your immediate future because all you want to do is get out of this financial mess you’re in, and this is a typical reaction for someone in your situation.

Your bankruptcy makes the foreclosure process cloudy depending on when your bankruptcy was filed. While Illinois Law is clear regarding the 210 days you’re afforded during pre-foreclosure proceedings, it is unclear in some cases as to when the pre-foreclosure will be reinstated and how much time is allowed before a sheriff sale is scheduled. Thousands of foreclosures take place without the knowledge of the homeowner, that is to say, without the homeowner understanding his or her position prior to the scheduling of the sheriff sale.

YOUR IMMEDIATE FUTURE CHALLENGES:  

Renting will be a challenge for you and establishing a small line of credit will be nearly impossible. You may be told that you’ll be able to purchase a home again within 3 to 4 years, but what they won’t tell you is that you’ll do so with 20% or more down at a higher interest rate because you’ll be considered a high risk investor and this will keep you on the sideline from purchasing for many, many years. It will take you at least 10 years to establish yourself as a credit worthy individual, that is if your credit is impeccable during that time. You’re caught up in the moment because your back is to the wall and your confidence is shot, and this is the reason why you’re so vulnerable in this situation.

HERE ARE SOME POINTS TO REMEMBER:

·       You can short-sale your home after filing bankruptcy.

·       A “Deed-in-lieu-of-foreclosure” is still a foreclosure.

·       Surrendering your home is still a foreclosure.

·       In a short-sale situation, your credit report reads “Paid in full for less than full balance” not a foreclosure and this is HUGE!

·       A short-sale prevents a foreclosure .......... PERIOD!

·       A foreclosure & bankruptcy together is devastating to your credit report.

BANKRUPTCY & FORECLOSURE COMBINED CREDIT COMPARISON:

Credit-wise: a bankruptcy is like a severe thunderstorm, but adding a foreclosure is like creating an F-5 tornado with incredible damage that takes a lot of time and effort to recover & rebuild.

Please contact us if you are unclear about any of the information provided on this page or for general questions or concerns at lthrowdklein@comcast.net

OR CALL LEE: 708.253.8996           or                       Denise @ 708.906.4961