In 2005 and following a lengthy process of lobbying by credit card companies, Congress passed a new bankruptcy law, which many have complained is not in the interest of consumers and is overly complicated. But however you feel about the new bankruptcy law, you have to abide by it and it looks, for now, like it is here to stay.

But what does the new bankruptcy law actually mean and aim to achieve? Well, essentially, this particular new bankruptcy law was designed to prevent those who do not need to file from doing so. It makes it tougher for people to declare bankruptcy and ensures that those who do should only have to do it once! It does this by enforcing financial counselling prior to bankruptcy and also financial management classes following. Perhaps the biggest change brought about by the new bankruptcy law was the introduction of a means test, which means a detailed inspection of your income and expenses before you can file.

Some people have argued that this makes bankruptcy all but entirely unavailable. This, however, is not the case. While there is no denying that there are now more obstacles in the way, for most of those who were eligible before 2005, eligibility is still present!

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A Short Sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure, auction, or bankruptcy.

Yes, you read that correctly a lender may be willing to accept a lesser amount than owed. Most of the people who are facing foreclosure tend to be upside down on their property meaning that they owe more than the property is worth or cannot afford to sell their property and pay all costs associated with selling . This is where a short sale takes place. A homeowner is put in a situation where they cannot afford to sell their property and walk away without owing the lender money.

Why would a lender accept this?

*In Illinois the foreclosure process is a lengthy it could sometimes take up to 9 months, which can also be delayed if you have the proper representation

*The foreclosure process costs the lender money. While the actual foreclosure process itself may not be very costly(3-5K), the amount of time that the lender does not receive payments, takes the property over, then tries to resell it later all amount to very high costs.

*Lenders do not like excess inventory or foreclosures on their books, especially in this market. Don’t you think they have enough properties to sell?

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