A foreclosure can occur when a property owner cannot make the scheduled payments on a home loan. A shaky housing market means that more foreclosures are taking place as lenders seek to recoup their losses. Foreclosure can be a long, drawn-out process. Ideally, it is best to try to avoid foreclosure in the first place. However, if the foreclose process has already started, homeowners may have legal options to fight and stay in their homes.
Talking to the Lender
Foreclosure isn’t a fun or easy process for the lender, either. The homeowner should be honest about his or her financial situation, ask about solutions such as loan restructuring or refinancing, and watch out for foreclosure scams. How the borrower should deal with the lender depends on the type of foreclosure procedure initiated by the lender. Judicial foreclosure is filed with the court and subject to court approval. Non-judicial foreclosure is based on provisions in the deed of trust signed when the homeowner and the lender agreed to the terms of the mortgage.
Review the Legality of the Foreclosure Process
In Illinois, a mortgage company must sue to foreclose on the house. If the lender wins, the house goes up for sale at auction, during which the homeowner has an opportunity to purchase the home. Otherwise, the homeowner must move out. The borrower should review all documents relating to the foreclosure, including the original mortgage agreement, and make sure that the lender followed all procedures and filed all of the necessary paperwork. If the homeowner can point out obvious compliance errors, the homeowner may be in a better position to negotiate. It’s unlikely that a borrower can get out of the mortgage itself, but the lender may be required to change the payment terms and make more of an effort to avoid foreclosure.
What to Do
In a judicial foreclosure, the borrower will need to file an Answer. An attorney’s help may be important as the borrower complete this process. If the homeowner misses deadlines, he or she could lose some of the legal options to raise counterclaims at a later date. A borrower might also counter the foreclosure by filing a lawsuit against the lender. Foreclosure is difficult for lenders as well as for homeowners. Most legitimate lenders may be willing to make efforts to stop the foreclosure process when appropriate or reasonable.
Filing for Bankruptcy
Aside from filing a counter lawsuit and working with the lender, the homeowner may be able to fight foreclosure by filing for bankruptcy. The basic options for a bankruptcy filing are either Chapter 7 or Chapter 13. Since Chapter 13 involves significant equity such as a home, it tends to be the preferred option when attempting to stop foreclosure proceedings. Under Chapter 13 bankruptcy, a debtor may get to keep most of his or her property and usually receives some more time to make back payments. The homeowner may need to consult an attorney for more advice on this option.
Fighting foreclosure takes some planning and research. The homeowner should make sure to have all documentation associated with the mortgage plus a copy of the foreclosure notice. A homeowner can certainly attempt to resolve the issue without legal representation, but an attorney may help with understanding complex foreclosure laws, fighting setbacks, and deciding how to proceed.