Are you living in Omaha, Nebraska or Iowa and at risk of losing your home because you are unable to pay your mortgage? Is the bank threatening you with foreclosure? Has a sale date already been set?
There is hope. Foreclosure assistance is available.
Our experienced lawyers can review your unique financial circumstances, make recommendations for bankruptcy protection, provide non-bankruptcy options for avoiding foreclosure, and answer any questions you have about utilizing a bankruptcy to stop foreclosure.
Using Bankruptcy to Avoid Foreclosure
If you are behind on your mortgage payments, your lender can have your property sold to repay the debt. In Nebraska, this is done through a non-judicial foreclosure sale. In Iowa, it is done through a sheriff’s sale. If your bank is moving forward with foreclosure, you will (or should) get notice of a sale date via U.S. Mail.
Foreclosure can be stopped
You can file for bankruptcy as late as the day before your sale date (and sometimes moments before the sale occurs). Once bankruptcy has been filed, the sale cannot move forward.
Both main types of bankruptcy have benefits when it comes to keeping your home. Chapter 13 bankruptcy allows you to catch up with late payments over the course of three to five years. Chapter 7 bankruptcy can eliminate other debts so you can focus on making your mortgage payments.
When it comes to foreclosures, you have options. As your attorney, it is our job to explain your options to you so that you can make the best financial decision for you and your family.
The Risks of Using Bankruptcy Alternatives
Bankruptcy is not the only way of avoiding foreclosure, but it may be the only option that gives you legal protection. You should be very careful when considering alternatives to bankruptcy.
Your mortgage company may be holding you off with promises that they will be willing to work out a deal with you, but until you have a workout deal in writing, nothing is binding. We get many clients who thought they had reached a deal with their mortgage company, only to then learn that a foreclosure sale was scheduled. All of your efforts to work out a deal should be communicated by certified mail.
There are also companies, many of them out of state, that advertise that they will negotiate with your bank for you. Unfortunately, some of these companies are disreputable and take your money without delivering on their promises. None of these companies have the legal protections of bankruptcy on their side.
Our bankruptcy lawyers will be happy to advise you on all of your options to avoid foreclosure.
We Can Help You Avoid Foreclosure
If you are faced with a foreclosure proceeding and want to save the house, it is an urgent matter to meet with a bankruptcy attorney as soon as possible. Bankruptcy is complex and takes time to get the various documents and requirements prepared and completed.
Investigating your foreclosure options with a bankruptcy lawyer is free and it provides you with the knowledge necessary to make the very best decision to protect your home and financial security.
Contact us to speak to one of our experienced bankruptcy lawyers or to arrange a free bankruptcy consultation. If you cannot come to our Omaha offices, we can consult with you by telephone.
Is it better to foreclose or file bankruptcy?
If you want to keep your house, then you should definitely consider bankruptcy. Once a house is foreclosed, it is gone forever (unless you have a guardian angel that would buy it back for you at the foreclosure sale).
With very rare exceptions, foreclosure is permanent and almost always undoable in states like Nebraska. In Iowa, there are a few more chances to save the house because real estate is foreclosed by a judicial process and it takes a bit longer.
Foreclosure is sometimes necessary, but it is very hard on your credit and it may take a very long time to buy another house, if ever again. If possible, you should avoid foreclosure.
There are times, however, when you should just let a house go and move on with your life, such as when you simply do not have enough monthly income to make the payments and there is no net equity in the property.
That said, you shouldn’t take foreclosure lightly and every reasonable option to avoid foreclosure should be studied and considered. While opinions from friends, family, and blog posts may be useful, they can also be tragically wrong and cause even more problems.
Each person and each case is unique. The safest course of action is to meet with an experienced bankruptcy attorney who can help you evaluate your options and make an informed decision.
Can filing Chapter 7 stop foreclosure?
Yes, a Chapter 7 can stop a foreclosure but normally only for a short period of time. Chapter 7 bankruptcies are not designed to deal with getting your payments caught up over 3 to 5 years. Chapter 13 bankruptcies are meant for that purpose.
If you are looking to buy a short amount of time, normally a Chapter 7 can delay a foreclosure sale by a few days to a few months or more. It is a risky move to file a Chapter 7 to stop a foreclosure sale, but in very limited circumstances, it might be a good option.
Can I file Chapter 7 if I have equity in my home?
In Nebraska it is generally safe to file a Chapter 7 bankruptcy if the equity in your house is not more than $60,000 and assuming that you want to keep the house. If you want to sell your house but still need to file bankruptcy, Chapter 13 is a safer way to go at first and then you may be able to convert to Chapter 7 after the sale is complete.
How long before the bank will foreclose after Chapter 7 is filed?
A bank (or mortgage company) normally takes a minimum of 6 weeks (and normally much longer) to sell your house once Chapter 7 is filed. While that is the general rule, that isn’t always true. Nebraska and Iowa have different rules, so it also depends on which state the property is located in.
It also may be longer or shorter depending on how far the bank got in the foreclosure process before you filed bankruptcy. If they were just days away from the sale, then, on average, they will sell your house faster after a Chapter 7 bankruptcy is filed as compared to if they were just getting started with the foreclosure process.
In Nebraska, the worst case scenario is the bank could temporarily suspend the foreclosure sale date and then reset it within 45 days and meanwhile seek permission from the Bankruptcy Court to allow the sale to continue. This is done through a Motion for Relief from the Automatic Stay. While this is not common, it is possible, and it has happened.
In Iowa, it again depends on how far the foreclosure process reached before filing Chapter 7.
- If a sheriff sale had already occurred, then a bank may be able to seek permission (Relief from Stay) from the Bankruptcy Court to have the sale formally approved (called a confirmation of sale hearing in state court) within a matter of a few weeks or so, but maybe much longer.
- If the sheriff sale had not yet occurred, then it would take longer to republish the sale and try it again.
Your bankruptcy attorney and the bank attorneys are very frequently in communication with each other to determine specific details when these situations arise. The goal is to not have any surprises so that you have enough advanced notice to plan ahead.
How long can I stay in my house if I file Chapter 7?
It depends on a lot of factors but normally you can stay in the house for at least a month or so, sometimes much longer, once Chapter 7 is filed. Each case is so different that no one can give you a precise answer. Each mortgage company has different rules and there are a lot of other factors that can also come into play.
That said, in a normal case, absent any very unusual circumstances, everyone involved in a foreclosure process attempts to work together to prevent any surprises and to give the homeowner a reasonable amount of time to voluntarily leave the property.
Should I consider a “short sale” or Deed in Lieu of foreclosure?
For Nebraska cases, I would proceed with extreme caution before ever agreeing to either a short sale or deed in lieu of foreclosure. Why? Because the 90-day statute of limitations only applies IF a foreclosure sale actually occurs. A short sale agreement does not necessarily get you off the hook for the deficiency if any exists. Although you may accomplish the avoidance of a foreclosure, you may have opened up a lawsuit for a deficiency at the same time by engaging in a short sale transaction. The status of limitations for a contract is 5 years in Nebraska. Thus, solving the foreclosure crisis by a short sale or deed in lieu of foreclosure could just create an enormous problem of financial liability that didn’t previously exist.
Of course, if you live in Iowa, there may be very good reasons to consider a short sale or deed in lieu of foreclosure, especially if you can negotiate a limitation on future liability. The goal of receiving as much credit as possible toward the mortgage note makes a lot of sense in that you remain liable for any balance by operation of Iowa law.
Will I Owe Money to My Mortgage Company After a Foreclosure Sale?
Nebraska and Iowa time frames for deficiency lawsuits are very different. The answer to that question depends largely on what state that your property is in. Nebraska residents have a huge advantage because lenders only have 90 days from a Deed of Trust foreclosure sale date in which to file a lawsuit for money (the amount of the deficiency) against the previous homeowner. Iowa residents, on the other hand, are open to getting sued by the lender for up to 10 years! That’s scary!
During many bankruptcy consultations, there are times that my client tells me that the only reason that they are in financial trouble is due to a mortgage foreclosure. They might be near the beginning of a foreclosure, in the middle of one, or coming to see me after the foreclosure sale has been completed. Obviously, if the sale has already happened, there is very, very little chance of saving the house, even with a bankruptcy filing. But, many people are desperately just needing to know their fate after a foreclosure sale occurs.
My advice, again, depends on the location of the house (or building). If the foreclosure sale is for property located in Nebraska, then my normal recommendation is to wait out the 90 days and see if anything happens. Of course, this assumes that the only significant financial problem that my client faces is related to the property and defaulted mortgage note.
Amazingly, 95% of the time, the mortgage company does not pursue the borrower after a mortgage foreclosure in Nebraska. In essence, a bankruptcy filing is not necessary under these circumstances because of the short statute of limitations in Nebraska for deed of trust foreclosures.
On the other hand, if my client owns real property in Iowa and is facing a significant deficiency in their mortgage note after a foreclosure sale, then filing bankruptcy becomes a near necessity in those situations. At that point, the discussion changes to which type of bankruptcy is the best option, whether that be a Chapter 7 or Chapter 13.