Iowa Foreclosure

“A creditor is worse than a master; for a master owns only your person, a creditor owns your dignity, and can belabour that.”  Victor Hugo, Les Miserables V.ii

Foreclosures in Iowa, as in other parts of the country that you read about today, are increasing rapidly.  One really good thing about Iowa is that it has a homestead exemption law which is quite substantial–in fact, unlimited under most circumstances against debt you made after you created that homestead. Iowa believes that your homestead is special.  In other words, your actual place of residence is protected even if you have a very large amount of equity in it.  So creditors can’t get at it in most instances–UNLESS you have waived that right with them. Unfortunately, when you give a mortgage on your home (the word mortgage comes from the french meaning “death pledge”) you are required to waive your homestead exemption as to the lender.  This exposes your homestead to foreclosure but the truth is you didn’t have a choice.

Now you find yourself missing a payment or two–or more.  It is important to act fast and get legal advice from a competent debt relief attorney. DO NOT DELAY.  DO NOT DENY, IGNORE, AVOID OR MINIMIZE THE PROBLEM! It is not going to go away. And just speaking with the bank and trying to make a “deal” or an “arrangement” over the phone–the so-called workout— frankly does not work most of the time. Quite the opposite, these often are a set up to hurt your financial and legal position.

There are, however, many things you can do to help save your home if done early and correctly.  There are other useful procedures you need to follow even if you are going to surrender the home or the sheriff’s sale has already taken place.  If you can, DO NOT wait until you get the mortgage foreclosure papers.  The more time you give your lawyer, the more he/she can do for you.  If you have already received the papers, pick up the phone and call now:  1-877-333-2839. If you contact us before the sheriff’s sale you may have a chance to avoid the sale and save the home.

There are many laws that protect you: Federal Bankruptcy Law (especially a Chapter 13 filing), the Truth in- Lending Act (TILA), the Real Estate Settlement and Procedures Act (RESPA), the Home Ownership and  Equity Protection Act (HOEPA), and the Iowa exemption, contract and mortgage laws, to name a few.

One very important rule in Iowa is that you can demand a delay of sale of your house for a substantial period of time after a foreclosure judgment–if you follow the correct procedures BEFORE the foreclosure judgment.

So it is quite necessary that you DO NOT DELAY and  DO NOT DENY,  IGNORE,  AVOID OR MINIMIZE THE PROBLEM!  Call Liptak Law Offices now at 1-877-333-2839.  We can help.

You may see a lot of advice today from the “money experts” about how you can and should call your bank and work out the mortgage problems with them. The truth is that in most cases people are behind on their mortgage because of their total debt picture–not just their mortgage payment.  Moreover, working with banks is not easy as is suggested and usually not very effective.  There are many “tips” given in the media on what to do with the problem.  Let’s go through and dispel some of these “money expert tip-myths”:

1.  “Speaking up” Myths:

This sounds good but nothing usually happens until you are actually falling behind in payments.  Of course, once you are behind additional fees and interest get tacked on to your account and these now become part of the debt. This is not usually made clear to you.  Mortgages are extraordinarily complicated financial contracts and most likely your mortgage has been sold to investors–who have rules about how the banks which service the mortgage for them must behave.  Workouts are not easily allowed under these agreements and in addition the servicing banks make more money when you fail!   So despite all the talk about working out the mortgage for you, it is not in the set-up, plan or goal to do it.  Talking is a nice gloss but the end result is much more debt is owed as time passes. The situation spirals into a deep hole which then you may not be able to get out of to save your house–even through bankruptcy.  Act early with a lawyer on your side even if you call the bank.

2.  “Know your options” Myth:

The idea that there are different kinds of “choices” you can use in response to being behind is quite misleading and certainly not simple.  Most banks now are just servicers and do not have any real authority to work out the loan in any financially meaningful way.  The bank can move the payment to the back of the loan and extend the term or make it an interest only loan for a while–but the economic truth which they do not tell you is that the loan is then re-amortized with a new term including additional late fees and penalties. Payments are put into suspense and corporate accounts and this makes  every new payment–which you now think is on time–late, so new fees and penalties are added, compounding your debt.  As a result your mortgage payoff is not delayed just for the one or two months you missed but for many, many months more–sometimes even years!  And the overall amount you will be paying for having missed a payment escalates to many times the payment which was due.

3.  “Seek Outside Help” Myth:

This is a good tip if you are speaking to  a lawyer who is knowledgeable about debt, debt relief and mortgage problems. Debt management, settlement or consolidation programs with credit counseling companies to the extent they have any success (many are outright scams) concentrate on unsecured debt–not mortgages. They typically emphasize payment of your unsecured debt, not your mortgage because that is how those companies make money.  Falling further behind on the mortgage is the result. If on the other hand you seek help from a mortgage assistance company, BEWARE!  Many of these are scams.  If you find the rare program that is not, it will just emphasize your mortgage payments and your other debt will feel like it is strangling you via harassing collection calls, judgments, wage garnishments, bank account levies,  etc.

The most powerful and correct response to the problem is a Chapter 13 bankruptcy.  A Chapter 13 bankruptcy can stop a foreclosure in Iowa before the sheriff’s sale occurs and create some options that no other outside help can give–up to five years to catch up on your missed payments and ways to deal with the financial shenanigans that banks play with mortgages.  It also deals with your unsecured debt at the same time in an orderly and realistic fashion, possibly even discharging all of it.  You–not the bank or the creditors–get control of the situation again.  And most importantly, you can deal with the rest of your life as the money pressure is relieved.

4.  “Consider a Short Sale” Myth:

First, selling a house in a short sale means all your mortgage lenders (first, second, HELOC) plus any creditors and taxing authorities with liens on your house need to agree to the sale.  Even if you can negotiate that (which is not easy) then a short sale means selling your house for not only less than it might be worth, eating up your equity, but for less than you owe on the mortgages and liens on the property.  That initially sounds great. After the sale, however, there is still a deficiency that you owe to the creditors. This is unsecured debt which is debt that can haunt you with harassment, suits and garnishments.

Sometimes the creditors forgive the deficiency.  But there are tax consequences from this.  It could be that the amount of money forgiven is treated as income to you and you will need to pay income taxes on it.  Consult a tax expert to be fully advised of the consequences BEFORE you have the sale.

5. “Learn Your Lesson” Myth:

This is what we hear often from the victim blamers and finger pointers.  While in some sense we are responsible for the debt and its consequences, there are complex forces and powers in the world effecting our lives over which we have little direct control.  Words, such as  “learn your lesson”, are like telling someone who is drowning that they should have taken swimming lessons.  That is not a life saver.  This is not humane. In a world of perfect and pure capitalism in which everything is balanced, without greed or excessive materialism, this may be an acceptable response.  But philosophy is not food for the hungry.  The bankruptcy law is man’s humanitarian attempt to understand and readjust the complexities of human behavior and its unwanted side-effects. Remember also what the bible says:  “At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor, his brother, because the Lord’s release has been proclaimed.” Deuteronomy 15:1-2

Bankruptcy is practical and reduces all of the challenges in your economic world to something manageable.  It is  fair, just, dignified and effective.  It integrates all your debt issues into one holistic approach while also giving you the opportunity to save your home–a place in which you can strive to create and maintain a good and productive life….

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” — Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

Disclaimer: The information contained in this FAQ is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the issues related to the area of consumer bankruptcy. Every individual’s factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.