When facing foreclosure it is important to know that you have options. Remember that when you are in foreclosure, or on the verge of foreclosure, you still own and control your property. Take time to understand the options below, and make a educated decision on how best to proceed.
In Illinois the foreclosure process from start to finish can take twelve to fifteen months from the time of your first missed payment. By the time a homeowner has received a Notice of Default (the official notice that the foreclosure process has or will begin) foreclosure can take 210 to 250 days. This gives the homeowner approximately a whole year to address the issue and fix the problem.
Listed below are 9 alternatives you have when facing foreclosure:
1. Do Nothing: If you as the homeowner do nothing, you will most likely lose your home in foreclosure. The bank/lender will go through the legal process of foreclosure in order to resposses your property. If you are still living in the property at the time of repossession, then you will eventually be evicted from your home. Your credit rating will be negatively affected by the foreclosure.
2. Payoff/Refinance: Pay off the entire loan amount plus any default amount and fees. This is usually accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of recent default. This option is only available if there is equity in the home.
3. Reinstatement: Paying your lender the entire default amount including interest, late fees, attorney fees, and taxes.
4. Loan Modification: Utilize your existing mortgage company to refinance the debt, extend the terms of the loan, or change your current interest rate. This may allow you to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payment.
5. Forbearance: A repayment plan the lender might arrange based on your financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. The lender will require you to provide information that demonstrates you will be able to meet the new payment plan.
6. Partial Claim: A 2nd loan from your lender that includs back payments, costs, and fees.
7. Deed in Lieu of Foreclosure: This option allows you to give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, and all mortgage payment and taxes must be current. This has a similar effect on credit as foreclosure.
8. Bankruptcy: This option can liquidate debt and/or allow more time. If needed I can refer you to a qualified bankruptcy attorney.
- Chapter 7 (liquidation) To completely settle personal debt.
- Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
- Chapter 11 (Business Reorganization) A business debt solution.
9. Sale: If your property has positive equity (money left over after all loans, fees, taxes, and commissions are paid) then you can execute a conventional sale. If your property is now worth less than your existing debt, you will need to perform a short sale or pre-foreclosure sale on your property. A short sale or pre-foreclosure sale can be negotiated with your lender by a qualified Real Estate Professional. In this case, the lender agrees to accept less than the debt owed.