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How Should Mortgage Lenders Respond to Requests for Short Sales?

 Posted on June 29, 2022 in Mortgage Foreclosure

IL debt attorneyCreditors often need to deal with situations where debtors fail to pay debts that are owed. This can be a significant concern for mortgage lenders who need to protect their interests in property used to secure loans. Debtors who are unable to make mortgage payments may take steps to sell a home. However, there are many situations where a home may be underwater, and the value of the property may be less than the amount the debtor owes to the creditor. In these cases, homeowners may seek to complete a short sale. They will usually need to receive approval from their lender to do so. Creditors will need to determine how to respond to short sale requests as they take steps to protect their financial interests and minimize their losses.

Response and Approval of Short Sales

When a debtor requests a short sale, they will typically seek to sell the home at the current market value, and they will ask their mortgage lender to forgive any deficiency. That is, if the home sells for less than what is owed on the loan, the seller will not attempt to collect the remaining balance from the debtor. While it may seem more financially beneficial for a lender to pursue a foreclosure, the expenses and complications involved in this process may prevent the lender from recovering a significant amount of what is owed. A short sale may be a simpler and easier way to recoup as much of the balance of the loan as possible.

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When Do Creditors Need to Provide Debt Collection Validation Notices?

 Posted on June 21, 2022 in Debt Collection

IL debt lawyerFor creditors, the ability to collect debts from debtors is crucial. Creditors loan money to debtors with the expectation that these amounts will be repaid, and when debtors fail to make payments as required, creditors will need to take action to protect their rights and financial interests. However, creditors are required to follow certain procedures during the debt collection process, and federal and state laws address the types of actions they are allowed to take and the requirements they must meet. Under the Fair Debt Collection Practices Act (FDCPA), creditors are required to provide debt collection validation notices in certain situations. Understanding the requirements that apply in these cases can ensure that a creditor will be able to avoid any actions that may affect their ability to collect the debts owed to them.

Validation Notice Requirements for Debt Collectors

Debt collectors may include personnel working directly for creditors, collection agencies, or debt buyers. When a debt collector first contacts a debtor, they are required to provide certain information in writing. This information is known as a debt collection validation notice. This notice must include:

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When Should a Mortgage Lender Accept a Deed in Lieu of Foreclosure?

 Posted on May 20, 2022 in Mortgage Foreclosure

IL debt lawyerThere are many situations where creditors will need to take action to address the nonpayment of debts. For mortgage lenders, these situations often lead to foreclosure, which can be a complicated and expensive process. However, there may be other options that will allow a lender to take possession of a property, including negotiating an arrangement in which a homeowner will turn over the deed to the home as a way to avoid foreclosure. By understanding when a deed in lieu of foreclosure may be advantageous, a lender can make sure they are taking the correct steps to protect their financial interests.

Benefits and Drawbacks of a Deed in Lieu of Foreclosure

Debtors may have multiple options for addressing delinquent mortgage payments. A mortgage lender may be able to negotiate loan modifications with a homeowner that will allow them to maintain ownership of the home and continue making affordable payments. If continued ownership of the home will not be possible, a debtor may seek a short sale in which the home will be sold for less than the amount owed on the mortgage. However, the best solution may be an agreement in which the debtor will voluntarily turn over the deed to the home to the lender. This may consist of a “cash for keys” arrangement in which the lender will pay a certain amount, and the debtor will vacate the home by a certain date. In some cases, the lender may even agree to lease the property to the debtor on a temporary or long-term basis.

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What Is the Replevin Process When Repossessing a Vehicle?

 Posted on May 13, 2022 in Auto Lenders

IL debt collection lawyerCreditors often need to address situations where debtors default on loans. For auto lenders, these situations require a timely response, since a vehicle used as collateral for a loan may be moved, concealed, or damaged by a debtor, and a creditor will want to recover the collateral quickly to protect its financial interests. When repossessing a vehicle, a creditor may use the replevin process, and they will need to follow specific procedures and ensure they are complying with their legal requirements.

Pursuing a Replevin Action

In some cases, creditors may be able to complete a repossession by asking a debtor to voluntarily turn over a vehicle, or they may take possession of a car that is in a public location. However, if a repossession would involve a “breach of peace,” a creditor may need to use replevin. For example, if a vehicle is locked inside a person’s garage, a creditor would not be able to enter the location and take possession of the vehicle without first receiving authorization to do so.

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How Much Can Creditors Collect From Debtors Through Wage Garnishment?

 Posted on April 27, 2022 in Debt Collection

b2ap3_thumbnail_shutterstock_1981093034.jpgWhen debtors fail to repay the debts they owe, creditors have a number of options for collecting these debts. If a creditor is able to secure a judgment against a debtor, they may then take action to pursue repayment of the debt. One of the best ways of doing so is through wage garnishment. By having a certain amount deducted from the debtor’s wages on an ongoing basis, a creditor will receive regular payments toward the amount that is owed. However, creditors will need to understand the limits that apply in these cases, and they will need to calculate the maximum amount that may be garnished from a person’s wages.

Wage Garnishment Under the CCPA

Federal laws detail the amounts that creditors may be able to receive from debtors through a wage garnishment order. These limits are specified in Title III of the Consumer Credit Protection Act (CCPA). This law states that deductions may be taken from a debtor’s disposable earnings, which is their income after all legally required deductions have been taken, including federal and state income taxes, Social Security taxes, and any retirement contributions that are required by law.

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UPDATED: Six Reasons to Object to a Chapter 13 Bankruptcy Plan

 Posted on April 25, 2022 in Bankruptcy

Six Reasons to Object to a Chapter 13 Bankruptcy PlanOriginally published: January 25, 2018 -- Updated: April 25, 2022

UPDATE: In addition to understanding the situations where it may be possible to object to the confirmation of a Chapter 13 repayment plan, creditors will need to know the procedures that will need to be followed in these cases. If valid objections are made, a debtor may be required to file an amended plan, and in some cases, a bankruptcy case may be dismissed altogether. 

Generally, creditors must make objections to a repayment plan at least seven days before the date of the confirmation hearing where the court will make a decision on whether to approve the proposed plan. Oral objections may be made at the first meeting of creditors (the 341 hearing), or written objections may be filed with the court. If no objections are made within the required time limits, the plan will be considered to have been filed in good faith, and it will usually be approved.

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Can a Debtor’s Preferential Payments Be Recovered During Bankruptcy?

 Posted on March 31, 2022 in Debt Collection

illinois creditors rights lawyerWhen a debtor files for bankruptcy, the person’s creditors will be understandably concerned about how this may affect their ability to recover the amounts owed to them. While the bankruptcy process will usually allow creditors to receive some of what is owed, there are a variety of issues that may result in creditors receiving less than they should. Preferential payments made by debtors can be a significant issue in these cases, and improper actions by debtors may result in some creditors being treated unfairly. If a creditor believes that a debtor has made preferential payments, they will want to determine how they can address this issue and ensure that these payments will be recovered so that assets seized during bankruptcy will be properly distributed to all creditors.

Elements of Preferential Payments

When filing for bankruptcy, debtors are prohibited from giving preferential treatment to one creditor over other types of debts they owe. Preferential payments made to a creditor prior to when a debtor filed for bankruptcy may be “avoided” by the bankruptcy trustee in their case. Creditors may request that the trustee pursue a “clawback” action to recover preferential payments that were made and ensure that all of a debtor’s assets will be properly distributed during the bankruptcy process.

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How Can Creditors Defend Against Clawbacks of Preferential Payments?

 Posted on March 22, 2022 in Debt Collection

chicago creditors rights lawyersFor creditors, recovering money owed by debtors is a primary concern. There are a variety of issues that can affect a creditor’s ability to receive what is owed, especially in cases where debtors file for bankruptcy. Preferential payments to creditors are one issue that may arise in these cases. If a creditor has received payments from a debtor before the debtor filed for bankruptcy, the creditor may be required to turn over some or all of these payments. In these situations, creditors will need to understand their options for defending against “clawback” actions.

Understanding Preferential Payments

When filing for bankruptcy, debtors are not allowed to provide preferential treatment to one or more creditors. A payment made to a creditor may be considered a preferential payment if it was made within 90 days before the debtor filed for bankruptcy and while the debtor was insolvent. These payments must be made toward “antecedent” debts that had existed previously, and they must have allowed a creditor to receive a higher payment than what would have been made to them in a Chapter 7 bankruptcy. Since preferential payments are illegal, a bankruptcy trustee may seek to recover some or all of the amount that was paid, or other creditors may pursue clawback actions to ensure that all creditors will be treated fairly during the bankruptcy process.

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When Can Creditors Ask for a Bankruptcy Case to Be Dismissed?

 Posted on February 28, 2022 in Bankruptcy

IL business lawyerWhen a debtor files for bankruptcy, this can put creditors in a difficult position. The discharge of a person’s debts will result in creditors not being paid what they are owed. Even if a debtor pursues a Chapter 13 bankruptcy, they will likely only pay off a portion of what they owe, and since certain debts are given priority in these cases, some creditors may be unable to recover a significant percentage of the debts owed to them. However, there are some cases where creditors may be able to request the dismissal of a bankruptcy case, which will allow them to resume collection activities and hold a debtor responsible for the amount they owe.

Reasons for the Dismissal of a Bankruptcy Case

In many cases, courts will dismiss bankruptcy cases because debtors fail to meet all of their legal requirements. Creditors may be able to pursue a dismissal in situations such as:

  • The debtor failed to file the proper forms and documents - Multiple legal forms must be filed throughout the bankruptcy process, and other information must be submitted within the proper deadlines. If a debtor does not submit a complete list of creditors, fails to file tax returns or submit the tax returns they have filed to the bankruptcy trustee, or does not pay the required filing fees, their case may be dismissed.

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How Can Creditors Collect Debts From a Loan’s Co-Signer?

 Posted on February 15, 2022 in Debt Collection

IL debt attorneyCreditors take on risk when they loan money to debtors, and they may use a variety of methods to protect their interests and ensure that they will receive the payments owed. In cases where debtors do not have sufficient credit history or where a creditor believes that a person may not be able to repay their debts, a co-signer may provide a guarantee that the amount owed will be paid. In cases where the primary debtor defaults on a loan or files for bankruptcy, creditors will need to understand their options for collecting the debt from the co-signer.

When Is a Co-Signer Liable for a Debt?

Generally, creditors are able to collect debts from either the primary borrower or a co-signer. However, they will need to meet the requirements of the laws in their state when collecting from a co-signer. In Illinois, debtors cannot take collection actions against a co-signer unless they notify the co-signer that the primary debtor has defaulted on the loan. This notice must be sent to the co-signer through first-class mail, and a creditor must give the co-signer 15 days after the date the notice was sent to pay the amount owed or make arrangements to do so. If a co-signer does not respond to the notice or fails to take steps to pay what is owed, a creditor may take a number of actions, including notifying credit agencies, contacting the co-signer directly to seek payment or initiating a civil case to collect a money judgment.

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