Foreclosure, considering filing bankruptcy

Posted by Joel on August 28, 2008 at 10:34:00:

I live in the state of Illinois and my property is in the process of foreclosure. I will start at the beginning which was about a year ago. My friend buys real estate and dreams big (he wants to be the next Donald Trump). He offered me $25,000 to purchase two properties for him in my name. Come to find out he gets cash back at closing time, which is illegal if done over 6% of sale price. That is how he said he could give me money. I'm pretty sure, but not cetain, the mortgage broker created a dumby company, placing a lein against the property for the amount that was to be given back. I, of course, agreed thinking to myself I could sure use the money, being assured payments would be made and there would be no problems as long as the payments were made. Well at closing he was screwed over by the mortgage broker, which in turn I was screwed over and didn't receive a dime. This was in August.
Fast forward to December. My friend's financial position worsens and he stops making the payments on both properties. In February he is able to get one property out of my name (the one that had equity), leaving me with a property in a horrible neighborhood. He is still unable to make payments and the bank started foreclosure proceedings in May and on August 4th the courts ordered the Judgement For Foreclosure And Sale. I firmly believe my friend and the mortgage broker were fraudulent in getting the loan pushed through. I don't feel I have anyway to prove it though.

The property has now been vacant for a whole year. It was completely unliveable from the start (my friend worked out the deal site-unseen). He was simply look at the cash-back he could get.

I have multiple questions.
1) Are accusations of fraud enough to get me out of the mortgage?
2) The total owed is $327,000 and the property may not even sell for $120,000. Am I liable for the remainder?
3) If I am liable is bankruptcy a reasonable option?
4) If bankruptcy is a good option would I still have a foreclosure against me?
5) What the heck was I thinking?

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