Chicago Bankruptcy May Help Homeowners Haunted by Old Mortgages

Homeowners shouldn't be surprised if they find a foreclosure notice in the mail after defaulting on their mortgage payments. But what if the bank began foreclosure proceedings for a loan you knew was already paid off?

More and more frequently, Chicago bankruptcy lawyers are seeing ghost mortgages coming back to haunt borrowers.

In a recent Reuters article, a Kansas couple refinanced their home to take advantage of lower rates. But while Wells Fargo said the original loan would be paid off in the refinance, it was never recorded in the paperwork.

As a result, the family was thrown into foreclosure - despite the fact that they had never made a late payment.

Experts attribute the problem to sloppy paperwork during the housing boom, when lenders attempted to sell as many loans as possible so they could resell to millions of investors. Now banks are using the same sloppy tactics to foreclose on as many homes as possible with reckless speed.

Some of the borrowers being pushed into foreclosure were never in default; others never even had a mortgage. Often times, a computerized banking error is the source of the mix-up.

It's a good reminder of why it's so important to keep tabs on the state of your credit. Banks report any late or missing payments - whether valid or not - to credit bureaus, who in turn record the discrepancies in your credit report. Having a credit score tarnished by a delinquent mortgage or a foreclosure you didn't know about can keep you from getting future loans or lower interest rates.

Of course, the majority of folks facing foreclosure are still those who have missed one or more payments, usually because of job loss or overwhelming credit card debt.

Regardless of how you've gotten into a mess with the bank, filing for bankruptcy in Chicago is often the best way out.

Chapter 13 bankruptcy has the power to stop foreclosure proceedings from the moment you file, so you can protect your house and stop the bleeding on your credit report.

Whether you're unfairly caught up in a foreclosure or are losing your house because you couldn't afford to make payments, the effects can ruin credit, put you at risk for costly lawsuits, and, of course, threaten to snatch the roof from over your head.

Bankruptcy can put a fast stop to foreclosure, so you can start rebuilding your finances, you credit, and your life.