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What Iowans Should Know About Foreclosure

What is foreclosure?

Foreclosure is the legal process used by a creditor to gain possession of real estate. Usually, foreclosure proceedings are begun by a mortgage lender when a homeowner has failed to make payments on a mortgage loan.

How can I avoid foreclosure?

Tips for avoiding foreclosure are many and varied. Many discussions of foreclosure and ways to avoid foreclosure make no mention of bankruptcy as an option. For a discussion of whether to consider bankruptcy when facing foreclosure, feel free contact our attorney and we can explain why bankruptcy may be your most effective option.

Sometimes people fail to make payments on their mortgages because they fail to prioritize the mortgage payments above their other debts, such as credit card payments. While no one wants to default on either kind of debt, failure to pay credit card debt may eventually lead to bankruptcy, but failure to pay the mortgage debt will lead to loss of the family home. Typically, a bankruptcy involving credit card, medical bills, or other unsecured debt will not lead to a loss of the family home. So, it usually is wiser to stay current on the mortgage, even if that requires defaulting on other debt.

Foreclosure In Iowa

It is important to understand that foreclosure laws are very different from state to state. This discussion only applies to foreclosures of property in Iowa. Any person who thinks a foreclosure case may be filed against him or her, or who has received any papers that he or she does not understand, should IMMEDIATELY meet with a lawyer.

That being said, there are some things that can be said about foreclosure in Iowa in general. First, Iowa law is very protective of homeowners compared to many other states. In some states, a foreclosure can lead to homelessness within weeks.

In Iowa, so long as the homeowner immediately seeks legal advice, a homeowner usually is able to retain possession of the family home for at least seven months from when the foreclosure suit is delivered. This allows the homeowner the time necessary to pursue a variety of options, including a private sale of the home, refinancing, workouts with the lender, and, if necessary, bankruptcy.

Will I owe money to the bank after a foreclosure?

The answer to this question depends on how many mortgages the homeowner has. If there is only one mortgage, then the lender will probably file a type of foreclosure which will not cause the homeowner to owe money after the foreclosure is complete. This is known as “foreclosure without redemption.” Again, if you are facing a foreclosure, consult a lawyer as to what type of foreclosure is involved.

If, on the other hand, you have two or mortgage mortgages, then you may owe a considerable amount of money after a foreclosure. A Chapter 7 bankruptcy, assuming you qualify, will effectively deal with any remaining balance.

How can bankruptcy help me avoid foreclosure?

If you are current, or nearly current, on your mortgage debt but will default if you must pay other debt (due to wage garnishments, for example), then a Chapter 7 bankruptcy will relieve you of your other debt and improve your ability to pay the mortgage debt.

If you are late but can catch up if you rid yourself of your other debt, then a Chapter 7 case will similarly help you.

If you are late and cannot catch up in a short period of time, or the lender is unwilling to negotiate, or a foreclosure case has already been filed, then you may need to consider a Chapter 13 case. First, you should be realistic about your ability to pay, because if you cannot afford the home, then you will probably be better off by giving up the home (after your seven months, if necessary).

If you think you can afford the home but you need several months or even a few years to catch up, then you should be talking to your lawyer about Chapter 13, because that is the only option (assuming an uncooperative lender and your inability to borrow to pay off the loan) which will slow things down and allow you to try to save the home.

Contact Us Today For Help

Our experienced attorneys can help you. Call our Iowa City office at 319-359-6492 or use our online form.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.