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Illinois Mortgage Delinquencies May Rise Due to RecessionLawmakers in the U.S. recognized from the beginning of the COVID-19 crisis that homeowners would need help with mortgage payments in order to avoid a surge in mortgage foreclosures. The Coronavirus Aid, Relief, and Economic Security Act had several provisions for homeowners, including:

  • A moratorium on foreclosure of single-family homes with federally backed mortgages, which the Federal Housing Finance Agency recently extended until at least Aug. 31
  • A mandate that forbearance be provided to homeowners, regardless of their delinquency status
  • The loosening of restrictions on modifying loans

Illinois has issued executive orders that put a moratorium on evictions, though it also said that homeowners are still responsible for making mortgage payments. Housing market analysts are concerned that the downturn in the economy could lead to the state’s worst mortgage delinquency rate since the Great Recession of a decade ago.

Obstacles Facing Mortgage Payments

More than one million Illinois residents lost their jobs due to businesses being forced to close or reduce staff in response to the coronavirus outbreak. Even with unemployment benefits and stimulus payments from the federal government, many homeowners have tighter budgets with which to make mortgage payments. In some cases, homeowners may be forced to choose between staying current on their mortgage payments and paying for other necessary expenses.

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How to Collect from a Deceased Debtor’s EstateIt is common for a person to die before they are able to pay off all of their debts. As a creditor, you have the right to seek repayment for debts even after a debtor has died. If someone cosigned on the debt, your collection efforts can shift towards the living party. Otherwise, you will be collecting the debt from the deceased party’s estate. Each state has its own rules for how soon creditors must make claims against the estate and how much of the estate is available to creditors. For creditors operating under Illinois law, here are the answers to three basic questions about retrieving debt from a deceased party:

  1. What Priority Do Creditors Have?: A deceased person’s estate must repay the person’s creditors before it distributes assets to beneficiaries. Illinois exempts certain assets from being collected, such as life insurance and retirement benefits. In the event that the deceased person’s debts are greater than their assets, their assets will be distributed based on the priority of each creditor’s claim.
  2. What Are the Deadlines for Collection?: The deadline for creditors to file a claim against a deceased person’s estate depends on whether the estate is going through the probate process. During probate, the executor of the estate must attempt to contact the deceased party’s creditors by delivering notifications to their addresses and posting an announcement in a local publication. If you are notified directly, you have three months to file a claim against the estate. If you discover the notification in a publication, you have six months to file a claim. Without probate, the executor of the estate is not legally required to contact you, but you can file a claim up to two years after the person’s death.
  3. Who Should You Contact About Collecting the Debt?: In most situations, you need to contact the person who has been designated as the executor of the estate in order to file a claim. The surviving family members of the deceased party do not inherit the debt and are not directly liable for repaying you. The exceptions are if one of the family members cosigned on the debt or if family members received assets from the estate without allowing creditors to file a claim.

Contact an Illinois Debt Collection Attorney

Collecting debt after a person has died is a sensitive issue. You need to be proactive in filing a claim while respecting those who are in mourning. A Chicago debt collection attorney at Walinski & Associates, P.C., can navigate the probate process to help you claim the money that is owed to you. To schedule a consultation, call 312-704-0771.

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Illinois Suspends Vehicle Repossession by Auto LendersThe COVID-19 pandemic has affected all areas of commercial lending, including automotive loans. With millions of Americans out of work, consumers may have more difficulty paying off the loan on their vehicle. Auto lenders have ways to handle clients who have fallen behind on loan payments, whether it is modifying the terms of the loan to give the client leeway or pursuing debt collection. However, repossession of the vehicle may not be an option right now, depending on where the client lives. You must examine recent laws and executive orders to ensure that you are not committing a violation when repossessing a vehicle.

Temporary Freeze on Repossession

Since the start of the crisis, states have differed on whether they will continue to allow vehicle repossession when a debtor is unable to make loan payments. Some states have strictly prohibited it, while others are merely recommending a pause on repossessions. In Illinois, Gov. J.B. Pritzker issued an executive order that suspended vehicle repossessions for as long as the state’s disaster proclamation is in effect. As of May 29, the disaster proclamation has been extended until June 27. The executive order cited several reasons for suspending vehicle repossessions:

  • Many Illinois residents are facing financial hardship because of the lockdown imposed by the state.
  • Having a vehicle is essential to public safety in order to obtain supplies and travel in the event of a medical emergency.
  • Essential workers rely on their vehicles in order to get to their workplaces.
  • Individual vehicles allow residents to travel while practicing social distancing.

Your Options as a Lender

Illinois’ executive order states that the pause on vehicle repossession does not affect your client’s obligation to continue paying the loan. Once the order is lifted, you may be able to move forward with repossession efforts if that is the stage you are at in the debt collection process. Until then, you can communicate with your clients to make sure they understand the consequences of missing loan payments and decide whether to allow deferments on payments in some cases.

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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.

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