Bankruptcy Stops a Foreclosure

Bankruptcy Stops a Foreclosure

If you’re a homeowner who has fallen behind on your mortgage payments, you run the risk of foreclosure. When a  mortgage lender or servicer forecloses gives you notice that your loan is in default, it will also give you a notice of a scheduled foreclosure sale. If you’re unable to catch up on your payments before the foreclosure sale, you can file a Chapter 7 or 13 bankruptcy case. While bankruptcy stops a foreclosure, and almost all other collection actions, it harms your credit. You should consider your options carefully before committing to this plan of action.

Know the Process of Foreclosure

Nebraska now primarily operates as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. The primary statute governing foreclosures, called the Nebraska Trust Deeds Act. Foreclosure, is a non-judicial remedy under this theory.

Before initiating a foreclosure, the lender must serve a notice of default and notice of sale. It is then recorded with the register of deeds. Not less than ten (10) days after the recording of the notice of default, the governing agency must send a copy to the borrower and others such as junior lien holders or those requesting such notice.

A notice of foreclosure sale, which is usually incorporated with the notice of default, must be sent to the borrower and all interested parties 20 days prior to the date of the sale. 

Generally the notice of sale must be advertised for five (5) consecutive weeks with the last publication at least ten (10) days before the sale but no more than thirty (30) days before the sale. 

Bankruptcy Stops a Foreclosure

Bankruptcy stops a foreclosure as soon as you file for Chapter 7 or Chapter 13 bankruptcy.

  • Chapter 7: If you qualify for this kind of bankruptcy, it occurs when you discharge your debts, meaning that you don’t pay them back. Chapter 7 doesn’t wipe out secured debt like a mortgage, so in this case, filing a Chapter 7 bankruptcy is only a temporary fix. That said, if the lender completes the foreclosure sale and the sale proceeds aren’t enough to cover what you owe on the loan, you may be responsible for the shortfall or deficiency. This varies by state, but if your lender does get a deficiency judgment against you, you can discharge this debt by filing for bankruptcy.
  • Chapter 13 occurs when you restructure your debt and get on a payment plan. As a result Chapter 13,  may enable you to keep your home because your mortgage can be included in the payment plan. Chapter 13 may be a better option for homeowners who want to keep their homes. It allows you to reorganize your debt and puts you on a 3-5 year repayment plan. You can include your past-due mortgage payments, plus any other costs or fees, in this plan. As a result, a Chapter 13 filing postpones the foreclosure sale for the duration of the repayment plan. If you complete the plan and get current on your mortgage, you’ll permanently stop the foreclosure sale. If you don’t complete your plan and resolve the issues with your mortgage, the foreclosure sale may be rescheduled.

FREE information on How to sell your house fast

Styl Properties, Inc. is here to help homeowners out of any distressed situation.  

As investors, we are in business to make a modest profit on any deal. However, we can help homeowners out of just about any situation, no matter what!  There are no fees, upfront costs, commissions, or anything else.  We offer the simple truth about your home and how we can help you sell it fast.

Give us a ring. We would love to help you understand the process and to answer all of your questions. You can reach us at 402 999.0577

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