Chicago Bankruptcy Lawyer Blog

Growing Consumer Denial About Overspending Contributes to Debt, Chicago Bankruptcy

Fri, 18 May 2012 18:21:24 -0600

A new survey shows that half of Americans spend more than they earn for at least part of the year.

Yet only 1 in 10 believes they are living beyond their means, reports MSNBC.com - and the number of consumers in financial denial may only grow as the economy picks up.

During the recession, many U.S. consumers pared back costs but still had to fall back on credit cards to cover the gap between earnings and expenses.

Family finances have suffered as a result. Often times, folks will wait for their credit score to hit rock bottom before seeking relief through Chicago bankruptcy.

Now that the economy is showing signs of improvement, experts are seeing hints that consumers are ready to start spending again. For instance, borrowing for student loans and cars increased this spring.

Unfortunately, our finances may not be as ready for a recovery as we are.

Median household income in the U.S. is down 7 percent since 1999. Americans have little savings, and more than a third admit to dipping into those savings to pay the bills. Another 22 percent admit to using credit to cover the gap, while 12 percent of us say we delay paying the bills when we don't have the money.

Until we're honest with ourselves about living beyond our means, how can we regain financial control?

Since most consumers don't have much control over income, it's up to us to control spending. If your family is drowning in debt, Chicago bankruptcy can be a lifesaver.

By reducing or eliminating financial obligations, bankruptcy may allow your income to cover the mortgage payment, health insurance premiums, and other important bills.

When you can stop relying on credit cards to make ends meet, you can stop worrying about interest rates, late fees, bill collectors, foreclosure notices, and all those other concerns that keep Americans up at night. Debt relief equals stress relief.

Making Business-Like Decisions, Filing for Chicago Bankruptcy May Be Best Way to Fix Finances

Mon, 14 May 2012 16:08:22 -0600

When businesses suffer economic setbacks, they take action: cutting costs, laying off workers, and, often times, filing for bankruptcy.

When consumers suffer economic setbacks, we tend to wait around and hope for the best. You can probably guess whose strategy is more effective.

By becoming more business-like in our approach to decision-making, say Chicago bankruptcy lawyers, more Americans may be able to nip overwhelming debt in the bud.

Whether it's a cutback at work, an illness, or an expensive car repair, unexpected costs can throw us for a loop when we're already living close to the financial edge.

But instead of quickly going into problem-solving mode to protect our bottom line, most folks are more likely to rely on credit cards while waiting for that raise our boss talked about last year.

Before we know it, our cards are maxed out, our mortgage payments are no longer affordable, and that raise never showed up in our paychecks.

Optimism is a great quality to have - just not when it comes to getting out of debt.

Business leaders know that the best time to take action is before financial troubles get out of control. If income isn't covering expenses, they don't wait until the bills are impossible to pay - they figure out how to lower the bills.

If that means filing for bankruptcy, or "reorganization," then so be it. Businesses don't make decisions based on emotions - there's no embarrassment, guilt or pride - they just do what they need to do to survive.

When your finances are in trouble, fixing them requires taking the biggest action possible. While you're sitting around waiting for a raise, a mortgage modification or a windfall, your situation will most likely get worse.

A Chicago bankruptcy filing can reorganize finances, saving potentially thousands of dollars per month. In the meantime, it can also legally protect against foreclosure and other repossessions.

A drastic situation calls for drastic measures. If you're behind on the mortgage or buried in credit card debt, bankruptcy may be the best business decision you ever make.

Too Much Borrowing, Not Loss of Home Equity, Is Root Cause of Debt in Chicago

Tue, 08 May 2012 09:59:20 -0600

The real estate market is seeing some promising signs of recovery - for instance, sales of existing homes are up slightly - yet prices are still falling.

As banks release formerly-held foreclosures onto the market, home values are only expected to drop further.

But while many homeowners are panicking at the prospect of being underwater on their mortgages, the loss of home equity probably isn't their real problem.

Our Chicago bankruptcy lawyers often point out that borrowing against home equity, not the decline of home values, is what has landed so many Americans in hot water.

In the past, a home was a safe shelter, a place to raise children, and a source of pride. No one expected to make money off their primary residence; they were content to just live in it.

Somewhere along the way, we stopped looking at houses as homes and began treating them as investments. Because homeowners speculated that value would increase rapidly, they allowed themselves to borrow against home equity and charge expenses that vastly exceeded income.

When the housing market didn't behave as hoped, many homeowners were left with debt.

With the media so focused on housing numbers and foreclosures, it's easy to shift blame to the national economy. But for most of us, the root of the problem is our family economy.

A loss of equity means little unless you have to sell your home. It's the overwhelming debt that usually leads to trouble paying the mortgage.

But this may be good news. While there's no guaranteed way to restore home equity, it is often possible to eliminate debt.

For homeowners behind on mortgage payments and struggling with debt, Chicago bankruptcy may be able to help. By filing for bankruptcy in Chicago, it's frequently possible to stop foreclosure, prevent repossession, and lower - if not entirely eliminate - debt.

Could Revised Chicago Bankruptcy Laws Ease Student Debt Bubble?

Wed, 02 May 2012 09:28:51 -0600

Bankruptcy has always been intended for Americans who need help breaking free from the burden of overwhelming debt.

Yet, since 2005, bankruptcy protection has been unable to help those with certain types of debt - namely, student loans.

Now lawmakers are debating whether bankruptcy laws in Chicago and other areas across the U.S. should be revised to include some education loans, according to The Wall Street Journal.

In 2005, Congress rewrote bankruptcy laws to ban the discharge of student debts through bankruptcy, citing concerns that new grads with few assets to lose would be too tempted to walk away from obligations.

Since then, skyrocketing college costs and increasing reliance on debt have created what some have termed the student loan bubble.

Even after adjustments for inflation, the average student debt load of new grads increased 24 percent between 2000 and 2010 to $16,932 - and many law and medical school students have debt burdens in the hundreds of thousands.

This year, collective student debt in the U.S. hit $1 trillion - more than our country's collective credit card debt.

Its weight is dragging down not only college students and their families, but the entire economy, as young consumers are unable to find jobs and, as a result, afford homes and cars.

It's no longer a question of whether students will be encouraged to walk away from their obligations if we help them, but whether they'll be able to survive financially if we don't.

New legislation would make it easier for college grads to reduce extreme debt. However, it would only apply to loans issued by private lenders like banks - not the government-backed loans that currently make up 90 percent of student debt. Politicians fear taxpayers would balk at picking up the tab if students were to default on loans handed out by Uncle Sam.

But while Chicago bankruptcy might not be able to directly relieve student debt, it can still relieve the burden faced by some young consumers.

College students and the relatives who have helped fund their education can free up money for education loan payments by reducing other forms of debt through bankruptcy - primarily credit card debt.

Those with large payments - whether for an education loan or a mortgage - tend to rely on credit to fund many everyday purchases. Filing for bankruptcy can help ease credit card debt, protect assets, and improve finances, making life with student loans a little easier.

For Consumers Scammed by Debt Settlement Companies, Chicago Bankruptcy Offers Realistic Alternative

Fri, 27 Apr 2012 10:12:03 -0600

With consumer debt on the rise, a growing number of Chicago residents are falling victim to debt settlement scams.

Last week, CBS Chicago reported that the Illinois Attorney General is suing a debt collection company, PN Financial, for ripping off nearly 50 residents.

In one case, the company offered to settle a Chicago woman's credit card debts for 50 cents on the dollar, but instead pocketed $1,800 of the victim's money, leaving her even further in the hole. Similar cases of debt collection, debt settlement, and debt consolidation scams been reported nationwide.

Of course, even when debt settlement firms are legitimate, they rarely produce the results that consumers expect.

These companies often lure in consumers who are hoping to avoid bankruptcy by promising to negotiate with creditors to reduce a balance or structure repayments. Meanwhile, they instruct customers to stop paying creditors, instead putting money into an account controlled by the debt relief firm.

The problem is that missed payments result in delinquencies that damage credit history and trigger harassment from bill collectors.

Debt settlement companies may not be in a hurry to negotiate, especially if they have other customers in line. If you have multiple credit cards or other sources of debt, the company may be able to work out a plan with one, but not others.

Sadly, many consumers who had hoped to avoid bankruptcy end up filing for Chicago bankruptcy protection anyway - but by that time, their credit has already been decimated and any hope of negotiating with creditors ruined.

While bankruptcy - like a delinquency - will show up on your credit report, it's a one-time event. And unlike other dings to your credit, only bankruptcy helps you move toward a better future.

When paying off debts is not a possibility, a debt settlement company is unlikely to make a difference. By providing a way for consumers to lower or eliminate debt, bankruptcy offers a real solution and makes it possible for consumers to start rebuilding credit - and their lives.

Children of Homeowners Are Unseen Victims of Foreclosures in Chicago

Tue, 24 Apr 2012 00:14:51 -0600

Losing a house to foreclosure isn't easy for a homeowner - but it may be even harder on the homeowner's children.

USA Today reports that 2.3 million kids have been forced from their homes since the foreclosure crisis began in 2007.

Another 3 million live in houses that are already in the foreclosure process or are at serious risk of foreclosure due to delinquent payments. As our Chicago Bankruptcy Lawyer Blog recently reported, a new wave of foreclosures - perhaps the biggest yet - is poised to hit the market later this year.

The damage goes deeper than simply losing a roof over one's head.

Studies show that when kids are forced to move during the school year, their reading and math scores decline significantly. Because such a large transition can be challenging socially as well as academically, older kids may be more likely to drop out of school.

Children are also affected by their family's reaction to the stress of foreclosure.

An analysis on MSNBC.com suggests that people under serious financial stress may be less attentive as parents. Money problems can wreak havoc on marriages, and children often suffer the fallout.

Families thrive on stability. While it's impossible to ensure a perfectly stable environment when prices, wages, and job security are always changing, maintaining a home can give a child a sense of security amid all the unknowns. For many families, filing for Chicago bankruptcy makes it feasible.

Chapter 13 bankruptcy can give consumers the power to legally stop foreclosure.

Often times, it's not the mortgage alone that's the problem. Credit card bills, payday loans and other obligations demand money that could be going to pay the mortgage.

By halting the foreclosure process, bankruptcy allows consumers with steady incomes the time to work out a reasonable repayment plan for overwhelming debt. As long as homeowners make timely payments, any remaining debt is usually discharged at the end of the repayment period.

Every family's financial situation is different. If you're in danger of losing your home, a Chicago bankruptcy lawyer can help you understand your options.

Homeowners Hurt by Flood of Foreclosures May Find Relief with Chicago Bankruptcy

Wed, 18 Apr 2012 20:51:42 -0600

With the $26 billion settlement between states and the country's largest lenders approved, a wave of foreclosures is predicted to wash over the market.

As a result, home values will likely continue falling, driving some underwater homeowners to file for Chapter 13 bankruptcy in Chicago.

Banks had been holding on to many delinquent properties since late 2010, according to CNN Money. That's when mortgage lenders began rethinking their foreclosure processes after falling under suspicion of robo-signing, a practice in which bank employees allegedly signed off on numerous foreclosure documents without proper verification.

While banks waited, some folks were able to continue living in their homes for months - or years - after they had stopped making mortgage payments.

On average, it now takes a bank 370 days to repossess a delinquent property. In some states, it takes even longer - for instance, Florida homeowners are in foreclosure limbo for an average of 861 days.

But though a stalled foreclosure may sound like a way for distressed homeowners to buy time, it's actually bad news.

Not surprisingly, many borrowers now suffer from years of damaged credit and limited savings that will translate into difficulty securing financing - or a rental property - once they're booted from their home.

Delayed foreclosures have affected all homeowners by keeping real estate prices artificially high. According to the article, new foreclosures could push already-low prices down by another 3.7 percent this year.

Optimistic market experts believe the flood will finally lead prices to bottom out and, eventually, encourage home buyers to take action.

Meanwhile, Chicago bankruptcy remains a valid option for the many homeowners hoping to avoid foreclosure and rebuild credit.

With banks poised to pursue foreclosures more aggressively, mortgage holders need a solution they can count on. Filing for bankruptcy has the power to stop foreclosure and allow consumers to restart their lives.

Chicago Bankruptcy Proves Valuable for Struggling Homeowners in City's Fragile Housing Market

Fri, 13 Apr 2012 12:35:59 -0600

Chicago suffers from one of the most fragile housing markets in the U.S, according to a report by the Treasury Department.

As much as 35 percent of all sales in the Windy City involve distressed properties, a statistic significantly higher than the national average. To make matters worse, sales of foreclosures are exerting downward pressure on the prices of neighboring homes.

It's been estimated that nearly half of all Chicago mortgages are underwater, a situation in which homeowners owe more on their loan than their home is worth.

Another factor that makes Chicago unique is the time it takes to process those foreclosures. While it takes most homes in the U.S. 348 days to move through the foreclosure pipeline, Chicago homes take an average of 575 days.

That's bad news for everyone. For most homeowners, a longer foreclosure process doesn't buy more time; it only puts off the inevitable, taking a greater financial and emotional toll on property owners as the bank works to take their home.

For nearby homeowners, long foreclosure processes mean more vacant properties in the neighborhood - and more eroded home value.

The report was accompanied by data from the Home Affordable Mortgage Program. Of the 1.8 million who had been offered trial loan modifications in the program - just a small portion of those who need help, mind you - just over half received a permanent modification.

What about those who didn't qualify - or the many who weren't eligible to apply in the first place?

For many underwater homeowners, filing for bankruptcy in Chicago is the most realistic way to escape a seemingly hopeless situation.

If you have negative equity on a first or second mortgage, Chapter 13 bankruptcy grants the ability to restructure overwhelming debts and late payments over a period of 3-5 years. As long as you can make timely payments, you can keep your house.

Not everyone qualifies for a mortgage refinance or loan modification, especially when busy and disorganized banks refuse to work with homeowners. But with Chicago bankruptcy, everyone can be given a fair chance.

Parents Who Co-Sign for Kids Often End Up Bearing Burden of Debt in Chicago

Sat, 07 Apr 2012 13:42:53 -0600

By the way the media spins it, you'd think borrowing money is essential to success. Perhaps this is why, despite difficult economic times, many parents are lining up to co-sign credit cards, student loans, and mortgages for their kids.

But while parents have the best of intentions, they may be doing more harm than good for their families. Many co-signers end up filing for Chicago bankruptcy in order to get their finances back on track.

There's a reason banks require co-signers for people without much credit history: they're high risk. There's no way for a lender to gauge how likely a young borrower is to make good on their payment promises.

According to Business Insider, three out of every four primary borrowers default on their co-signed loan.

The person you are co-signing for may be responsible and motivated, but that doesn't guarantee they will have the financial means to make payments, particularly with today's job market.

When you co-sign, you're not only vouching for the primary borrower, but you're also putting your personal finances on the line. If your child, grandchild, niece, or nephew doesn't pay up, the default will impact your credit score - and thus your ability to qualify for future loans.

When bill collectors come after the remainder of the loan, it is the co-signer who will be on the hook.

As a result, many adults today are facing foreclosure and rock-bottom credit after decades of staying financially afloat. Because the primary borrowers' credit scores will also be affected, many young borrowers are forced to start their adult life on the wrong financial foot. There are success stories, of course - but in many cases, co-signed loans are a lose-lose proposition.

If your finances have been pulled underwater by a family member you co-signed for, bankruptcy may be your most realistic recourse.

By filing for Chapter 13 bankruptcy, young adults can avoid defaulting on credit card debts by making arranged payments, preventing creditors from going after the co-signer (you). Filing for bankruptcy as the co-signer is a bit more complicated. First, the loan must be restructured to release you from liability.

While Chicago bankruptcy protection is not usually applicable to student loans, reducing other unsecured debts such as credit card balances through bankruptcy may provide relief.

Chicago Bankruptcy Can Assist Illinois Homeowners Who Have Fallen Behind on Mortgage Payments

Mon, 02 Apr 2012 03:44:39 -0600

While fewer homeowners are behind on their mortgage payments, the number in default is still well above average, reports the New York Times.

By the end of 2011, one in every eight U.S. homeowners was either in trouble with their mortgage or already in foreclosure.

People tend to miss their first payment deadline due to an unexpected financial pinch, such as a costly car repair or temporary unemployment. Most of us believe that once we recover, we'll be able to get right back on track.

Unfortunately, many homeowners forget to factor in the fees and credit damage that come with that single late payment.

The NY Times article attempts to explain the importance of payment deadlines - and how missing those deadlines hurt your chances of ultimately keeping your home.

The Grace Period

Many of us have heard of a lender's grace period, but don't quite understand how it works. Technically, a house payment is usually due on the first of the month - but some lenders allow a 15-day grace period. The catch is that lenders are super strict about when this period ends.

If your check is received a day after the 15th, you could be charged a late fee of up to 5 percent of your payment. That means that next month you'll owe two full payments, plus the penalty. It doesn't take long to understand how one late payment can put a borrower on a downward spiral to delinquency.

Effect on Credit

Many homeowners who are in financial trouble avoid seeking help from Chicago bankruptcy because they worry about the effect a bankruptcy filing will have on their score.

What they don't realize is that their credit score may already be tarnished from late mortgage payments - and bankruptcy may be the only way to get back on track.

If you are 30 days late on a payment, your lender sends a report to credit bureaus, which results in a mark on your credit score that will remain for 7 years. It doesn't matter how clean your record was prior to your tardy payment - or how quickly you rebound afterward.

A single late payment can drop your score by 100 points or more, and your number will continue to decline until you hand over the money. The more late payments, the worse your credit record.

While bankruptcy will also appear on your credit report, filing for Chapter 13 has the ability to improve your financial situation so that you can stay current on future payments.

Avoiding Foreclosure

According to the Times article, people who can resolve their tardy payments between 90 and 120 days' delinquency have the best shot at avoiding foreclosure. Unfortunately, when that many late fees have accumulated, it can be extremely difficult to recover the ability to make payments.

The best way to pull your family out of a financial hole is to avoid falling into the downward spiral in the first place. Filing for Chicago bankruptcy may be your best chance.

Illinois Runs Out of Financial Aid for College, Increasing Student Debt in Chicago

Thu, 29 Mar 2012 00:18:09 -0600

More Illinois students are being forced to take out expensive loans to pay for college, and it's putting a financial strain on their families.

A rapid increase in applications for financial aid has caused the state to run out of funds early, according to the Chicago Tribune. While 140,000 applicants are expected to receive aid, an equal number of eligible students will be turned down.

The problem isn't exclusive to Illinois. In fact, some are calling student loans the next big debt bubble.

In a recent survey, more than 80 percent of bankruptcy lawyers say they've seen an increase in clients looking for help with school loans. Our Chicago bankruptcy attorneys certainly have.

Unfortunately, bankruptcy can rarely eliminate student debts because of a 2005 bankruptcy law reform. Unlike unsecured debt such as credit card debt and medical expenses, school loans cannot be discharged unless it can be proven that the debt holder has an undue hardship - which usually translates into a disability that makes it impossible to work.

Getting out of paying private college loans is about as impossible as getting out of paying child support.

But critics say that has to change.

National student debt now totals $867 billion - more than the $704 billion Americans have in collective credit card debt.

Because parents and grandparents frequently co-sign the loans, they're often held liable, putting their homes and savings at risk. On average, parents of children with student loans are responsible for $34,000 of debt.

With tightening credit, rising tuitions, and a dismal job market, paying those loans back is no easy feat.

While filing for bankruptcy in Chicago is unlikely to eliminate student debt, it can ease the burden of other types of debt. For students or their families, bankruptcy can provide a way to organize and reduce payments for obligations such as credit card debt, medical bills, and personal loans.

Bankruptcy may provide enough breathing room to allow you and your loved ones to make mortgage payments and other important bills while also staying current on student loans.

You may still be dealing with debt, but by continuing to make important payments, at least you won't be dealing with accumulating fees and penalties, credit damage, and bill collectors.

Chicago Bankruptcy Attorneys Warn of Predatory Loans Big Banks Are Handing Out to Customers

Sat, 24 Mar 2012 10:47:30 -0600

Payday loan companies have long been criticized for their predatory nature. Now, the nation's biggest banks are surreptitiously doing the same thing under a different name.

Lenders like Wells Fargo and U.S. Bank have begun offering advance loans through checking accounts with direct deposit.

Like payday loans, these advance loans are short-term and high-interest.

Struggling consumers take out the loans so they can pay their bills before payday. But when their paycheck finally comes in, the loan's outrageous fees can make it impossible to pay up on time - so borrowers take out another short-term loan, and soon get caught up in a cycle of debt.

In fact, this cycle is a common reason may Chicago bankruptcy attorney clients seek protection through the bankruptcy system.

But while payday loans often use a post-dated check to retrieve payment for the loan, banks have the ability to deduct their due right out of a checking account the moment a scheduled deposit, such as a paycheck, occurs.

Because customers often plan to use that deposit to pay other important bills - like mortgages, health insurance premiums, and credit card balances - they're forced to take out yet another advance loan.

A recent CNN Money article criticized the practice for eroding savings and driving bank customers to close accounts, leaving some without any bank at all. Without the security of a checking account, consumers are more likely to turn to credit cards and payday lenders.

Though lenders claim the loans are intended for emergencies, there's evidence that banks are using the income from advance loans to make up for regulatory limits on debit and credit card fees.

When you're not short on cash, it's easy to see the danger in payday loans. But as flat wages and rising prices cut into the bottom lines of more Americans, many of us are turning a blind eye to terrible terms. Short of getting a large promotion or winning the lottery, there's just one solution that makes sense: bankruptcy.

On average, fees on advance loans equate to a 365% APR. If you're having trouble paying off credit card debt with 25% interest, how can you handle a dozen times that much?

Filing for Chicago bankruptcy breaks the cycle by making payments manageable or eliminating your need to pay back the debts altogether. Either way, you'll be able to regain control of your paycheck.

Unpaid Medical Bills Lead Many Consumers to File for Chicago Bankruptcy

Mon, 19 Mar 2012 09:32:52 -0600

Coping with health issues is undoubtedly stressful, emotionally and financially. Now it appears that doctors and hospitals are putting salt on our wounds.

Hospitals are kicking unpaid medical bills to collection agencies, wrecking patients' credit in the process, according to a recent Associated Press story. Increasingly, those filing for bankruptcy cite medical bills as the reason they're seeking protection.

It's estimated that 30 million Americans were contacted by bill collectors about medical costs in 2010. That's up from 22 million in 2005.

The problem isn't just limited to the uninsured.

It's common for large gaps in coverage to result in bills for thousands of dollars. Chronic illnesses can lead people with health insurance to lose their jobs and, thus, their coverage.

Other times, bills are considered unpaid as a result of a dispute with an insurance company, such as a billing error. In the majority of cases, these unpaid debts are for less than $250.

And paying medical debts doesn't always make the problem go away.

In one instance, a Texas couple applied for a mortgage only to learn that a $200 bill - which they had since paid - ruined their credit simply because it had been sent to a collection agency. Any debt managed by bill collectors can stay on your credit report as a blemish for years after it's paid off.

It's estimated that as many as 3.4 million Americans have medical debts lingering on their credit reports, even though the bills have been paid.

Uncle Sam is trying to ease the pain with the proposed Medical Debt Responsibility Act, a bill that would require debt collection companies to remove paid-off medical debts from credit reports within 45 days.

Even if approved, however, it's impossible to say for sure when the bill would go into effect.

All it takes is one illness to put most Americans out of the black and into the red, health insurance or not. Chicago bankruptcy provides a way to pay down overwhelming unsecured debts or, in some cases, wipe the debts completely clean.

The stress of bills alone can be enough to make you sick. Most people don't plan on filing for bankruptcy, but when injury or illness has derailed your plans, a Chicago bankruptcy filing can be a lifesaver.

Homeowners Struggling to Close Short Sales in Chicago May Want to Consider Bankruptcy

Tue, 13 Mar 2012 00:17:01 -0600

As the number of underwater mortgages continues to rise, short sales have become a popular way for Chicago homeowners to avoid foreclosure without filing for bankruptcy.

Unfortunately, homeowners are finding out that a short sale can quickly go from a saving grace to a nightmare. Quite often, a Chicago bankruptcy would have provided a more successful outcome.

As the Chicago Tribune recently illustrated, many lenders are overwhelmed by the sheer volume of calls and requests they're getting from homeowners looking to refinance, get a loan modification, or complete a short sale.

As a result, banks are refusing to approve a large number of short sales - even if homeowners are qualified and buyers are already lined up.

According to the Tribune, it can take months - or even years - to get a sale approved, even for those who persistently call and e-mail their bank.

The reality is that your lender has absolutely no obligation to negotiate any sort of deal. Whether there are small errors in your paperwork or the bank believes it can get a higher price by selling the property on its own, you may be out of luck.

Even when lenders are willing to participate in a short sale, the battle isn't over yet.

Often times, properties are sold for less than the amount of the debts secured against them, leaving a collectible balance. Unless this remaining debt is formally extinguished, the note can be transferred to a collection company.

At best, a short sale simply resolves the ownership of your home, but doesn't do anything to settle debt. At worst, the process can turn your life upside-down with no guarantee of any benefit.

Many borrowers assume that seeking a short sale as an alternative to foreclosure will prevent a stain on their credit report.

However, if you've missed multiple house payments and other bills, your credit is already considerably tarnished. And just like with foreclosure, a short sale ultimately leaves you without a home - or a means of applying for a mortgage in the future.

In most cases, it's unsecured debt - not the mortgage - that's at the root of the problem. Many homeowners seeking a short sale have stopped making house payments in order to have more money to juggle other expenses.

Filing for Chapter 13 bankruptcy can provide a better solution. By getting a grip on large unsecured debts, homeowners can get current on mortgage payments, stay in their house, and - with the help of Chicago bankruptcy lawyers - eliminate debts.

Chicago Bankruptcy Myths That Keep Consumers from Finding Financial Relief

Wed, 07 Mar 2012 07:57:54 -0600

For a growing number of Chicago residents, the biggest obstacle to overcoming financial struggles may be their own unfounded fears.

According to Bankrate.com, many folks hold untrue beliefs about bankruptcy that keep them from filing for protection.

Common misconceptions include the idea that bankruptcy will make it impossible to get credit, that the government will repossess all of your personal property, or that everyone in the neighborhood will know you filed for bankruptcy.

Yet filing for bankruptcy in Chicago may be the most practical - and painless - solution for people facing foreclosure or buried in credit card bills.

Depending on the type of bankruptcy for which you are eligible, bankruptcy has the ability to protect important assets, shrink large debts, and provide a fresh financial start.

Bankruptcy isn't for everyone. If you can get a handle on costs by refinancing your mortgage or tightening up your budget, it will be better for your credit - at least in the short term. But not everyone has those options. When simple measures aren't enough, a Chicago bankruptcy has the power to get debts under control so you can rebuild your finances.

Here are some of the most common bankruptcy myths - and the realities behind them - according to Bankrate.com.

Everyone will know you filed

Maybe if you're a famous actor or athlete, reporters will dig up the fact that you filed for bankruptcy. For a normal consumer, the only people who will know about your bankruptcy are your Chicago bankruptcy lawyer and your creditors. While it's possible that an employer could view your credit report and notice that you've filed, he or she would also see that you're in the process of conquering financial troubles.

You'll lose all your assets

Because Chapter 7 bankruptcy comes with the possibility of asset repossession, many people believe it's a given. This simply isn't true. States have exemptions that protect assets such as homes, cars, retirement funds, and more. If you continue making payments on an item - which should become easier with bankruptcy - you can keep that asset.

Your credit will be ruined forever

When you file for bankruptcy, your credit will take a hit initially. However, most Chicago bankruptcy attorney clients are already suffering from rock-bottom credit scores. At least bankruptcy allows you to do something about it. Just because bankruptcy remains a footnote on your credit report doesn't mean your rating will be permanently damaged. From the moment you start paying on time, keeping your credit ratio low, and making smart money moves, your credit will begin to recover.

Filing for bankruptcy is difficult

Bankruptcy isn't as complex or time-consuming as most people fear. Your primary concerns are making sure the paperwork is filled out correctly - which is why a professional bankruptcy lawyer comes in so handy - and ensuring that, if you have a payment plan, your payments are made on time. That's it.