Special Segment: Surviving Foreclosure

November 9, 2009 (CHICAGO) Once the shock wears off life does go on. It is possible to recover from foreclosure.

A DuPage County split level has been home for the McCarthys for 10 years. But foreclosure will force them from this five bedroom home into a mobile home.

"I have a whole gamut of emotions...fear, anger, frustration," said Ann Mccarthy.

Bill's commercial real estate business took a dive when the credit crunch hit. Keeping up the mortgage became impossible.

"It's an emotional roller coaster there are so many external forces that are uncontrollable," said Bill McCarthy.

"People who are better people than you and I are in foreclosure," said Steven Bashaw, attorney specialized in foreclosure.

Bashaw is helping the McCarthys. He sees clients get through the process with greater ease if they get honest about the causes of the foreclosure.

"What caused that default and have you fixed it," said Bashaw.

A foreclosure typically stays on your credit report for seven years after the foreclosure is filed but what you do with that time during the process or even after you've left the house can determine how quickly you recover from foreclosure.

"It gives you an opportunity to really relearn how you're spending your money," said Catherine Williams, Money Management International.

Catherine Williams is the vice president of financial literacy for a non-profit debt counseling agency, Money Management International.

Williams recommends:

  • Keep utility payments current to show recent good payment history
  • Keep homeowner's insurance current in case of an accident
  • Keep one credit card for emergencies and pay it rigorously on time

"You pay it immediately don't even wait until the next payday make sure it's always there on time that's how you rebuild credit," said Williams.

Williams also recommends you start saving. She says savings demonstrate healthy financial habits and offers a buffer if you want to buy another home.

"The next time around a lender is certainly going to look at income expenses their current credit history he's going to want to see some additional down payment," said Williams.

Lauren Chandler says she recently downsized from her roomy south loop condo. Multiple sclerosis cut her career short as a flight attendant and a subprime mortgage with an adjustable rate led her into foreclosure.

"It's overwhelming," said Chandler.

Chandler entered into a short sale meaning the buyer paid less than was owed on her mortgage, stopping the foreclosure but Chandler walked away with nothing.

Now Chandler is rebuilding her finances one day at a time, finding joy in volunteering at La Rabida Children's Hospital and staying on a strict budget.

"Things are going to happen...I might have to make them happen," said Chandler.

The McCarthys hope to stay in their home until after the holidays and say, as hard as this has been, they have learned what is truly important in the lives.

"Ultimately materials good are not why God put us on this earth," said Bill.

"Six years ago, it was okay but I'm happier today," said Ann.

Some other recommendations: get support from friends and family. Keeping emotions bottled up can make it more difficult to deal with the facts of the matter.

Get professional help navigating the system and find professionals who specialize in foreclosure. And keep good records in case you need to correct your credit history in the future.

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