Peoria Bankruptcy Law Blog

Illinois families going through foreclosure know the prospect of potentially losing a home can be an emotional roller coaster ride. After the "robo-signing" catastrophe that threw homeowners into foreclosure chaos, the industry is attempting to clean up its image and gain a modicum of respect back from Americans. In 2007, the scandal highlighted the fact that homeowners had been subjected to inappropriate fees, a sometimes illegal foreclosure process and mishandled accounts. The issues uncovered during this crisis unearthed problems that were mostly unnoticed for years.

Much of the blame during the housing crisis fell on the shoulders of mortgage servicers. Unfortunately, many do not believe much progress has been made toward change for the better. In fact, some people have waited two-and-a-half years just to complete their request for modification. The major issues within the housing industry caused an almost nationwide foreclosure moratorium, a huge settlement addressing past "improprieties," and the federal government to step in with required standards for the industry.

Illinois readers surely know that the Black Eyed Peas are well known for their hit song "I Gotta Feeling," whose lyrics predict that "tonight's gonna be a good night." Unfortunately, that doesn't ring true for everyone. The Peas' former business manager certainly won't be partying every day since he recently announced he has filed for bankruptcy protection.

The longtime music industry manager seems to have suffered through some pretty difficult days confronting his own personal finances. He filed for Chapter 7 bankruptcy protection recently, after acknowledging that he had failed to file state and federal tax returns for the wildly popular singing group, as well as other clients. Attributing the failure to a massive workload occasioned by the group's sudden rise to fame, the business manager sought the protection of the bankruptcy court as he struggles to regain control of his finances.

Illinois homeowners facing foreclosure may be able to seek help from the state with a new program. The Illinois Foreclosure Prevention Network connects homeowners to other organizations that may be able to help them, including various state, federal and nonprofit resources. Financial help is also be available with this program in conjunction with the Illinois Hardest Hit Fund Program, funded by the U.S. Treasury. The program is able to provide mortgage assistance up to $25,000 for struggling homeowners who may be facing foreclosure because of under-employment or unemployment.

Foreclosures in the state are expected to rise this year. Previously, foreclosure had slowed due to widespread issues with documentation. The effort is coordinated by the Illinois Housing Development Authority and is the result of a settlement the state reached with major lenders over mortgage abuses. Now, $1.1 billion is available in the state to help qualified homeowners obtain mortgage modifications and refinancing.

According to major financial news outlets, many residents in Illinois and elsewhere are faced with too many bills and not enough income due to joblessness and a sluggish economy. Depending on the level of personal debt and one's income, there are many different types of bankruptcy or debt management options to consider when protection is necessary. For instance, those with a debt of $5,000 or less might want to consider other methods of satisfying outstanding obligations before turning to bankruptcy relief. These lower levels of debt can typically be repaid through various options including: using credit cards with very low interest rates and budget modifications. However, larger amounts of debt may require somewhat more sophisticated debt relief strategies.

Chapter 7 allows eligible persons to clear out most, if not every type of unsecured debt. But this relief is not available to higher income earners, and some personal and real property assets may or may not be guarded under this type of bankruptcy. Accordingly, care should be taken to fully investigate every potential scenario, particularly because liquidation of assets is typically involved to pay off outstanding financial obligations.