Foreclosure is an extremely traumatic experience, and with the U.S. economy in its current state, it's becoming more common than ever. Residents of Illinois have several options when facing foreclosure. Unfortunately, most of them require a certain amount of money and must be successfully negotiated with your lender before they can be enacted. Learning which one works for you may be your best chance at stopping foreclosure on your home. Most foreclosures take about 9 months to go through, which is the maximum time you'll have to act.
Instructions
1. Work out a repayment plan with your lender that allows you to gradually pay back your delinquency. The most common method is to set a monthly fee on top of your regular mortgage payments which allows you to pay down the debt. Lenders tend to be very open to such a proposal provided they are confident in your ability to make the payments. Also, Illinois foreclosures are a judicial matter, which means they must be declared by a judge. You can use that leverage to negotiate a repayment plan and save everyone the trouble of going to court.
2. Prepare a reinstatement plan. While repayment plans make up the missed payments gradually, a reinstatement plan does it all in one go--covering not only the delinquency but late fees and legal costs as well. This can be a terrible financial burden, but resolves the matter quickly: taking the bitter medicine in a single swallow as it were. In Illinois, you'll usually have 3 months to complete payments under a reinstatement plan, and you are only allowed to exercise the right once every 5 years.
3. Pay off the entire mortgage with a redemption plan. Similar to a reinstatement plan, you can pay off the whole of the balance on your mortgage--making your house free and clear. You can contact your lender to get the exact amount of the mortgage plus interest. As with Step 2, this can be extremely painful financially and result in the loss of other assets. But as with Step 2, it resolves the matter pretty definitively. Illinois law does not permit a post-foreclosure right of redemption, which means you will need to pay off the mortgage within 3 months of the final foreclosure of your home to claim redemption.
4. Sell your home. Some lenders may agree to let you sell your home as you would normally, by using a realtor and going through regular channels. They will usually only consent to do so if the sale can take place quickly--within 3 to 5 months. It benefits you by protecting your credit rating and allowing you to get some of your investment back. Lenders prefer it because a traditional sale typically fetches more than a foreclosure sale would, and since Illinois foreclosures must be court-ordered, it saves on further legal fees for both parties.
5. Conduct a short sale, which means selling your home for less than the amount you still owe on your mortgage. The lender accepts a partial repayment based on the amount of the sale and considers the mortgage repaid. Short sales are extremely difficult to negotiate, but it is sometimes in the lender's best interest if they don't believe they can make as much by selling the home after foreclosure.
6. Present the deed in lieu of foreclosure. Illinois is a lien theory state, which means the property itself can act as collateral to back up your loan. If you can't make up your delinquent payments and are unable to sell your home, you can negotiate with your lender to simply hand over the deed to the house and have all debts forgiven. Although you'll lose your home, it will spare you the process of foreclosure and will help keep your credit rating stable so that you can get another mortgage in the future.
7. Refinance the loan. Depending upon your income and the state of your credit, you may be able to re-negotiate a new loan with better terms, or modify or restructure the loan so that you can make the payments more easily. This can be extremely difficult, but it isn't unheard of in cases where you have favorable assets in your corner.
8. File a partial claim. For loans made under the auspices of the FHA, you may be able to file a one-time only payment through the Department of Housing and Urban Development. HUD will place a lien on your property and you will need to sign a promissory note agreeing to pay off the loan, but it will be interest free and can eliminate the debt to your lender.
9. File for bankruptcy. The protection of bankruptcy can hold off foreclosure on your home or at least delay it until you can organize your finances and prepare a plan to handle the debt. In Illinois, there are two types of bankruptcy you can consider. If you can bring your mortgage up to date within the next 3 years, you can file for Chapter 13 bankruptcy. Otherwise, you can file for Chapter 7 bankruptcy. Chapter 13 allows you to keep your house, but you will not be held personally liable for your debt under Chapter 7.
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