Oak Park Real Estate & Estate Planning Blog

The U.S. Supreme Court recently declined to hear a case concerning underwater mortgages and liens on those properties in consumer bankruptcy cases. In declining to hear the case, The Court has left previous case law intact that says a debtor cannot strip down, or remove, a lien against an underwater mortgage through consumer bankruptcy. Our experienced Oak Park bankruptcy lawyers want to give you more information about the recent case and Supreme Court history on the issue. Details of the Supreme Court’s Rulings on “Stripping Down” In 1992, the U.S. Supreme Court heard the case Dewsnup v. Timm , in which it ruled that Section 506(d) of the U.S. Bankruptcy Code does not allow a debtor to “strip down” a lien to the “judicially determined value of the collateral.” That case involved an underwater mortgage, and the Court’s ruling made clear that a debtor cannot reduce the amount owed on a partially undersecured mortgage lien against the debtor’s home. In refusing to reduce the lien on...

If you have had mortgage debt forgiven after a foreclosure , or through a short sale or deed in lieu of foreclosure, you could owe a significant amount of taxes on that forgiven debt. However, you should know that the Consolidated Appropriations Act of 2021 has extended the Qualified Principal Residence Indebtedness (QPRI) through 2025. What does this mean for taxpayers who have had mortgage debt forgiven? In short, for some of those taxpayers, it may be possible to exclude the forgiven mortgage debt from income for purposes of paying federal income taxes. Any taxpayers who received a 1099-C, which is a Cancellation of Debt form, from a mortgage lender, it will be important to determine whether or not the QPRI exclusion is applicable to your situation. If the QPRI exclusion does apply, you will not need to pay federal income taxes on the forgiven debt. In addition, homeowners who are anticipating that they will go through a short sale or a deed in lieu of foreclosure anytime throu...

When consumer protection advocates and debt experts are looking at types of consumer debt, where does mortgage debt come into play? What, if any, is the link between mortgage debt and the likelihood of filing for consumer bankruptcy ? A recent article in M Report discusses the role that mortgages and housing more generally play in consumer debt. In short, the article suggests that mortgage debt tends to be treated differently by consumers than other types of debt, and in many cases, it is not a hindrance to consumers. The following is some additional information from that article. Mortgage Debt is Not Typically Counted as Consumer Debt One of the first things to know, according to the article, is that mortgage debt is not usually counted as consumer debt when analyzing whether amounts of debt are likely to lead to financial trouble. Indeed, as the article clarifies, “mortgage debt specifically is not counted as consumer debt” in most contexts. While many consumers do list mortgage...

Personal bankruptcy trends in Oak Park and throughout the U.S. can sometimes provide us with a bigger picture concerning consumer debt and economic stability. A new report from the Consumer Financial Protection Bureau (CFPB) addresses recent trends in consumer bankruptcy filings and the ways in which those trends have changed in the last two decades. As such, the report considers how consumer bankruptcy filings trends shifted with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, and the foreclosure crisis and subsequent recession that began more than 10 years ago. What does the CFPB have to say about bankruptcy trends in the 2000s? We will say more about the report and its potential implications for consumers in the present who are considering bankruptcy. Key Aims of the CFPB Report Given that the new CFPB report stretches over a period of nearly 20 years, there are some key aims that the authors intended to address. Those key aims, or q...

If you recently filed for Chapter 13 bankruptcy in part to avoid foreclosure, and if your mortgage was with Wells Fargo, it is important to know about a recent lawsuit that alleges fraudulent practices by the bank. In short, according to an article from CNN Money , a married couple who filed for Chapter 13 bankruptcy have alleged that Wells Fargo pushed through “stealth” mortgage modifications after bankruptcy. These new modification terms did in fact modify monthly mortgage payments, but they also extended the terms of the mortgages, resulting in hundreds of thousands of dollars in interest. Individuals who have filed for Chapter 13 bankruptcy in Illinois could be impacted by the outcome of the case. To better understand the stakes, let us tell you a bit more about the current case against Wells Fargo. Debtors Allege that Wells Fargo Modified Mortgage without Authorization In 2014, Christopher and Allison Cotton had a mortgage with 16 remaining years of paymen...

Rebuilding your credit after bankruptcy is a difficult but not impossible task. Although it can be tricky to apply and get approved for loans if you have a recent history of consumer bankruptcy , such a goal is not out of the realm of possibility. If you recently filed for bankruptcy or are considering Chapter 7 bankruptcy, you might have heard that you will need to abide by a specific waiting period before applying for a mortgage. According to a recent article from The Mortgage Reports , Fannie Mae has announced that it is lowering the mandatory waiting period to apply for a mortgage after a bankruptcy, a short sale, or a foreclosure. What else do you need to know about seeking out a home loan after having your debts discharged through consumer bankruptcy? Following Bankruptcy, Debtors Only Need to Wait Two Years If you are attempting to get approved for a home loan after filing for bankruptcy, you will not have to wait as long as you might have feared. Until t...

For consumers who have previously filed for bankruptcy or have general concerns about their access to credit , a new rule may provide some help. According to a recent news release from the Consumer Financial Protection Bureau (CFPB), the agency has “finalized a rule to improve information reported about the residential mortgage market.” What will the rule do? In short, it will update the reporting requirements for the Home Mortgage Disclosure Act (HMDA). By updating reporting requirements, we will have better knowledge of consumer access to mortgage credit. What is the Largest Consumer Financial Market? The Mortgage Market If we want to ensure that Chicago consumers are continuing to recover from the financial crisis and are bouncing back after filing for personal bankruptcy , we need to know more about how the largest consumer financial market in the world is working. What is the largest consumer financial market in the world? According to the CFPB Director Richard C...

The U.S. Supreme Court recently ruled in favor of Bank of America when it unanimously decided that “homeowners who declare bankruptcy can’t void a second mortgage, even if the home isn’t worth what they owe on the first mortgage,” according to an article in the Chicago Tribune . In short, it is a big win for the banks. Underwater Primary Mortgages and Personal Bankruptcy How did the case come about? It involved homeowners in Florida who were underwater on their first mortgages and wanted to use consumer bankruptcy to “strip off” a second mortgage. In general, the homeowners argued that, since their second mortgages would only be paid after their primary mortgages—and those primary mortgages could be canceled in a Chapter 7 bankruptcy proceeding—the second mortgages are “essentially worthless,” according to a report in the Wall Street Journal . The lower courts that heard the cases found in favor of the homeowners, indicating that they could “nullify the second loans”...