Facing Foreclosure and Bankruptcy? Know Your Rights

 Posted on February 23, 2024 in Bankruptcy

Facing foreclosure and bankruptcy can be an overwhelming and distressing experience. These situations can have far-reaching consequences on financial stability and peace of mind.

However, it's crucial to remember that you have rights and legal options to help navigate these challenges. To ensure you are well-informed, let’s explore your rights when facing foreclosure and bankruptcy, so you know how to protect your interests if needed.

What Is Foreclosure and Bankruptcy?

Before delving into the legal aspects, let's start by understanding what foreclosure and bankruptcy entail:

Foreclosure

Foreclosure is the legal process where a lender can take possession of a property in case the borrower cannot make mortgage payments as agreed upon. It typically involves selling the property to recover the outstanding loan amount.

Bankruptcy

Bankruptcy is a legal proceeding that gives people or businesses the opportunity to seek relief from overwhelming debt. It can offer a fresh financial start by discharging certain debts or restructuring repayment plans.

Key Terms to Know

Mortgage Default

This occurs when a borrower misses multiple mortgage payments, leading to the initiation of the foreclosure process.

Foreclosure Notice

The lender must legally provide notice to the borrower before initiating foreclosure proceedings. Typically, the notice includes information on how to cure the default. However, the notice may vary by state.

Bankruptcy Chapters

There are several bankruptcy chapters, including Chapter 7 (liquidation), Chapter 13 (reorganization), and Chapter 11 (reorganization for businesses). Each offers different debt relief options.

Automatic Stay

When bankruptcy is filed, it triggers an automatic stay, preventing creditors, including the lender, from pursuing collection actions, including foreclosure, during the bankruptcy process.

Legal Considerations When Facing Foreclosure and Bankruptcy

Now, let's explore your rights and legal considerations when facing foreclosure and bankruptcy:

Foreclosure Rights and Options

Foreclosure Notice Review and Response

Upon receiving a foreclosure notice, your first step should be to review it thoroughly. The notice typically outlines the amount owed, a deadline for payment, and instructions for curing the default.

It's essential to respond promptly and seek legal advice if you believe the foreclosure is unjust or if you need assistance negotiating with the lender.

Loan Modification

You have the right to request a loan modification from your lender to make your mortgage more manageable. This can involve extending the loan term, reducing the interest rate, or capitalizing on missed payments.

An attorney can help you negotiate with the lender to secure favorable terms.

Foreclosure Defense Strategies

Consulting with an attorney specializing in foreclosure defense can be invaluable. They can explore various defense strategies, such as challenging the lender's actions for irregularities in the foreclosure process or seeking a temporary restraining order.

The latter halts the process while you negotiate a solution.

Alternatives to Foreclosure

In some cases, exploring alternatives to foreclosure may be in your best interest. These may include a short sale (selling the property for less than the mortgage balance) or a deed in lieu of foreclosure (voluntarily transferring the property to the lender).

An attorney can analyze your particular situation and advise you on the best course of action.

Bankruptcy Rights and Options

Automatic Stay

When you file for bankruptcy, an automatic stay goes into effect. As mentioned earlier, it provides immediate relief by halting all collection actions, including foreclosure.

This legal protection offers you the breathing room needed to address your financial situation without the constant pressure of imminent foreclosure.

Chapter 7 Bankruptcy

Under Chapter 7 bankruptcy, certain unsecured debts can be discharged, offering you a fresh financial start.

However, it's important to note that you may need to liquidate some non-exempt assets to repay creditors. An attorney can assist you in understanding which of your debts can be discharged and if Chapter 7 is the right option for you.

Chapter 11 Bankruptcy

Businesses facing foreclosure can use Chapter 11 bankruptcy to restructure their debts and continue operations. This can provide an opportunity to renegotiate mortgage terms or sell assets strategically to address financial challenges.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy gives you a chance to readjust your debts into a manageable repayment plan over three to five years. This can help you catch up on missed mortgage payments and potentially save your home from foreclosure.

Your attorney will assist in creating a feasible repayment plan that aligns with your income and financial goals.

Bankruptcy Exemptions

Bankruptcy law provides exemptions allowing you to keep certain assets, such as your primary residence or personal belongings while obtaining debt relief.

These exemptions vary by state. An attorney can help you determine which exemptions apply to your situation. This ensures that you retain essential assets.

Bankruptcy Counseling

You must complete credit counseling and debtor education courses from approved agencies before filing for bankruptcy.

Your attorney can guide you through this process, ensuring you fulfill all necessary requirements for a successful bankruptcy filing.

Legal Representation

Navigating foreclosure and bankruptcy can be complex. It's highly advisable to seek legal representation to protect your rights and explore the best options for your unique situation.

An experienced attorney can provide expert guidance, help you learn your rights, and represent your interests throughout the process.

The Last Word

Facing foreclosure and bankruptcy is undoubtedly challenging, but knowing your rights can help significantly. Newland Attorneys, with offices in Arlington Heights, Chicago, Libertyville, Crystal Lake, and Joliet, is here to help you navigate these difficult times.

Our team of skilled bankruptcy and foreclosure defense attorneys has the knowledge and experience to guide you through these processes, ensuring that your rights are protected and your financial future is safeguarded.

Don't face foreclosure and bankruptcy alone. Contact Newland Attorneys today, and let us provide you with the expert legal assistance you need.

With our support and your rights protected, you can work toward a more stable financial future.

Call 847-549-000 TODAY for a free phone consultation!