Blog

Call Us312-704-0771

Chicago debt collection attorneys
Subscribe to this list via RSS Blog posts tagged in foreclosure

Chicago Debt Collection LawyerAn unsecured creditor can secure their claim on a debt by receiving a judgment lien. If a court finds in favor of the creditor in a lawsuit, the creditor can request that a lien be put on the debtor’s property – most often their home. If the debtor tries to sell the house, the buyer or seller must pay the lien before ownership can be transferred. The lien would also make them a junior creditor if another creditor foreclosed on the property. As a creditor with a judgment lien, you may wonder whether you can initiate a foreclosure on the property. While you do have that right, there are several reasons why foreclosing on a judgment lien may not be worth your effort:

Sale Process: Forcing a sale on a home will cost both time and money. You will need to publish a listing of the sale and pay a fee to the local sheriff’s department to hold the property. You will also need to hire a real estate attorney to ensure that the sale is legal. Once you are able to sell the property, you will be required to give the debtor time to repay the lien. The whole process could take the better part of a year, with no guarantee of success.

Homestead Exemption: Each state offers a homestead exemption to protect a homeowner’s equity in their primary residence. In Illinois, the exemption is $15,000 for a single person and $30,000 for a married couple. This means that the first $15,000 or $30,000 from the foreclosure sale will go back to the debtor. You will get nothing out of foreclosing on a home if the debtor’s equity is less than the exemption.

...

When You Can Foreclose on a Reverse MortgageOlder homeowners can use a reverse mortgage as a source of income or credit. While borrowers qualify for regular mortgages based on their income, a reverse mortgage is based on the borrower’s equity in their home. People age 62 and older are eligible to take out a reverse mortgage on their principal residence as long as they own it outright or have enough equity in it. The mortgage balance is not due until a qualifying event occurs. If the borrower or their heirs do not repay the mortgage, the lender may foreclose on the property.

When Can a Reverse Mortgage Become Due?

According to Illinois’ Reverse Mortgage Act, there are five ways that the balance on a reverse mortgage can become due:

  • The borrower or last remaining tenant dies;
  • The property is sold;
  • The borrowers no longer use the property as their principal residence;
  • The reverse mortgage contract included a maturity date; or
  • The borrowers failed to meet their contractual obligation to maintain the home.

When the borrowers die, their heirs will determine whether to repay the reverse mortgage, sell the home or allow a foreclosure. The borrowers may leave or sell the home if it does not meet their needs in old age. However, a lender may foreclose on a borrower’s home while the borrower still lives there if the borrower cannot pay property taxes and home insurance or maintain the value of the property. Unlike with other foreclosures, lenders often cannot seek deficiency judgments against borrowers of reverse mortgages if the property sells for less than the balance of the mortgage.

...

Options for Junior Creditors During ForeclosureJunior creditors are at a disadvantage when senior creditors decide to foreclose on a debtor’s mortgage. The senior creditor has priority in the foreclosure sale, and the junior creditor may receive little or no compensation for what the debtor owes it because its debt is often unsecured. A junior creditor can be:

  • A lender that gave a second mortgage to the debtor with the property as collateral; or
  • A party that received a judgment lien against the debtor’s property as the result of winning a lawsuit against the debtor.

A junior creditor can put itself in a position to receive some compensation from a foreclosure by participating in the foreclosure process. It may also file a lawsuit against the debtor to collect money still owed from its lien.

Sale Surplus

A junior creditor may claim the surplus from a foreclosure sale as long as it establishes its lien on the foreclosed property during the process. This requires the junior creditor to:

...

Utilizing Mortgage Foreclosure to Collect DebtFor mortgage lenders, property foreclosure is a complex yet effective method of retrieving debt when borrowers fail to make mortgage payments. A successful foreclosure can allow the creditor to sell the property and recover a large share of the borrower’s debt. In Illinois, all foreclosures must go through a court. A judicial foreclosure allows legal protections for both sides but can draw out the process. A creditor must follow a set of legal procedures in order for a court to approve the foreclosure.

When to Foreclose

If you are a mortgage lender, you may start considering foreclosure when a borrower misses a scheduled mortgage payment. However, you must give the borrower amble opportunities to pay the mortgage before you can request foreclosure in court:

...
Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
Back to Top