Illinois is a judicial foreclosure state. This means that in order to obtain a property back after a default on a mortgage and note, the bank must sue the borrower in state court by filing a foreclosure lawsuit. This can be an arduous, expensive, and time consuming endeavor for the banks. If the bank wins, then the homeowner can often be found liable for a “deficiency,” which is the difference between the amount owed on the note and what the bank manages to get paid in the foreclosure lawsuit after a court-approved judicial sale. For example, if you owe your lender $200,000 and the property is eventually sold at a judicial sale for $120,000, then you could possibly be on the hook for $80,000.00.
Sometimes our clients want to avoid the lengthy court process, return the property to the bank, and walk away without a deficiency judgment. Often, we advise our clients already in the lawsuit that a good way to do this is through a provision of the Illinois Mortgage Foreclosure Law (IMFL) called a consent foreclosure.
This process is similar to a Deed-in-Lieu of foreclosure, which allows for individuals to turn the property over to the bank without going through a foreclosure. However, unlike some Deed-in-Lieu of foreclosures, a consent judgment is a state law that provides that, upon agreement of the parties, a party can walk away from the home without owing the bank any deficiency. It is also done through the court system, thus sometimes avoiding long negotiations with the banks. This means that, if you have a capable attorney who can appropriately negotiate a consent foreclosure/consent judgment on your behalf, you will give the bank back the property and not owe the bank anything.
Our clients like a consent foreclosure because it allows for them to move on with their lives without the burden of a possible deficiency judgment hanging over their head and, often, allows for them to avoid bankruptcy. The banks like a consent foreclosure because it avoids future legal costs, fees, and the possibility of losing the property if the defendant is successful in his, her or their foreclosure lawsuit.
The only potential downside is that there could be tax implications from the forgiven debt. While Congress has provided relief from this tax debt in the past, it has failed to adequately address this issue in recent years. However, whatever the tax implications, it is often well worth it to avoid a potential deficiency of tens, if not hundreds, of thousands of dollars in debt.
If a lender has already sued you, do not wait to consider your options. An experienced attorney can help you in your time of need and help you reach your goals.
If you, or someone you know is struggling with overwhelming debt and needs a fresh start, call us today! We are devoted to giving you a fresh start, while protecting important property in the face of overwhelming debt. Contact us for a free phone consultation to better inform you prior to talking to an attorney, or anyone else making promises about your financial future. Located in Illinois with meeting locations throughout the Chicagoland area, we have ability to meet with you at any convenient Chicagoland location from 9:00 a.m. to 5:00 p.m., Monday-Friday. However, evening and weekend appointments are available upon request by calling 847.693.9120.
NOTICE: The materials provided are for informational purposes only and should not be viewed as legal advice. The materials also mainly concern Illinois foreclosures. It may also be viewed as advertising material. You should contact us directly, or your attorney, to obtain advice to any issue or problems. This article, by itself, does not create an attorney-client relationship and the opinions are those of the individual author and do not reflect the opinions of any Law Office or any other individual, attorney, entity or individual.