Housing Boom a Bust for Some!

The housing market is red hot right now with homes selling for well-above asking price. This has caused home values to skyrocket. For many homeowners, this is a welcomed phenomenon. With interest rates as low as they are, it is an opportune time to tap into that equity through a cash-out refinance or home equity line of credit.

However, this may have the unwelcome result for those needing to file for bankruptcy in Nebraska. Under Nebraska exemption laws, an individual filing for bankruptcy can exempt (protect) up to $60,000 in a home. The $60,000 exemption also applies to proceeds from the sale of a home for six (6) months after the sale. In Nebraska, the homestead exemption cannot be doubled, meaning that a married couple filing for bankruptcy cannot each claim the $60,000 exemption to protect up to $120,000 in equity.

Example: Husband and wife have $70,000 in credit card and medical debt, a home worth $250,000 with a mortgage of $150,000, and household income of $65,000, which has been stagnant for the last 3 years. Over the last 3 years, the home increased in value by $75,000 without any major renovations taking place. The home currently has $100,000 in equity, but only $60,000 of that equity can be exempt (protected). The couple needs to file bankruptcy to stop a garnishment and to address the $70,000 in unsecured debt. Based upon their income and household size (2), they qualify for a Chapter bankruptcy, If they file a Chapter 7 bankruptcy, they risk a Chapter 7 Trustee selling their home, paying $150,000 to the mortgage company, $60,000 to them for the homestead exemption, and distributing the remaining $40,000 to the unsecured creditors. In short, they'd risk losing their home.

The couple has some other choices to explore as alternatives to filing Chapter 7 bankruptcy:

1. Sell the home and settle debts. Sell while the market is hot. With this option, the couple would have funds available to negotiate lump sum settlements of the $70,000 credit card and medical debt. Many creditors will settle debts for 30-60% of the debt.
2. Do a cash-out refinance and settle debts. Assuming the couple qualified for a cash-out refinance, this would be a great time to tap into the equity to address the debts they have.
3. File a Chapter 13 bankruptcy to reorganize debts. Instead of going to each individual creditor to work out a settlement, the couple could file a Chapter 13 bankruptcy a propose a 3-5 year plan of reorganization. In the Chapter 13 bankruptcy, the couple would retain their home, but would have to pay the unsecured creditors an amount equal to the non-exempt equity in their home of $40,000. The issue would be whether they could afford to pay the $40,000 over the duration of the plan.

The housing boom may have the adverse effect for those needing to file for bankruptcy because the homestead exemption in Nebraska is only $60,000, which may not be enough to protect Nebraskan's home in the current housing market.

Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you to make that decision is crucial. Instead of worrying what will come next, you should meet with a bankruptcy attorney to discover your options for dealing with your financial situation.

What is Chapter 7 Bankruptcy?

A Chapter 7 is a bankruptcy where a Chapter 7 Trustee claims and liquidates a Debtor’s non-exempt assets to pay debt. In exchange, the Debtor receives a discharge with some exceptions like student loans and domestic support obligations.

When a person files for bankruptcy they are required to list a bunch of financial information, including what they own (assets), what they owe (debt), income, and expenses. All of the assets are put into a "bin" that is called property of the estate. The goal is for a person to protect as many assets in their "bin" as possible using exemptions. When an exemption is claimed, the person effectively removes the asset from the "bin" and puts it on their "shelf".

When it comes time to handover the "bin" to the Chapter 7 Trustee, the goal is for the "bin" to be empty or filled with assets of minimal or inconsequential value. If there is nothing in the "bin", the Chapter 7 Trustee has nothing to claim an interest in and liquidate to pay debt. If there are only assets of minimal or inconsequential value, the Chapter 7 Trustee will most likely abandon those assets to your "shelf". If there is anything of value, the Chapter 7 Trustee will claim that asset, remove it from your "bin", and place it on his "shelf" to then sell/liquidate to pay your creditors. In an overwhelming number of Chapter 7 bankruptcies, the Trustee claims no assets. As such, the person filing for Chapter 7 bankruptcy retains all of his or her property.

The ultimate goal of the Chapter 7 bankruptcy is to obtain the discharge, which eliminates the filer's legal obligation on his or her debts. The person fills a "box" with all of his or her debts, including but not limited to credit cards, medical bills, car loans, payday loans, mortgage loans, and loans owed to family and friends. Certain debts are pulled out of the "box" and put on the shelf, meaning those debts survive the bankruptcy and are non-dischargeable. The goal is to have as much of the debt stay in the "box" and be incinerated once the discharge is granted. Some debts that come out of the box are student loans and child support obligations to name a few.

Instead of worrying what will come next, meet with a bankruptcy attorney to discover your options tailored to your situation.

Contactless Bankruptcy

In Nebraska, it is possible to file for bankruptcy without meeting your attorney in person. That is because now you can make your way through the entire process virtually. I call this the new era of contactless bankruptcy. Gone are the days of providing paper copies of bills, paychecks, and bank statements. You can now accomplish all of that using either secured email or a client portal. Gone are the days of making payments with cash or check. You can now easily make a secured online payment with a debit card or eCheck. Gone are the days of signing a large stack of paper documents. You can now review and sign documents electronically.

If you or someone you know are thinking about filing for bankruptcy, but are hesitant because you are nervous to leave your home or go to an office building, then contactless bankruptcy is designed just for you. You still have the personal direct support and guidance of an attorney. You can become debt free from the safety and comfort of your home.

The process of a contactless bankruptcy is easy and straightforward:

1. Schedule consultation online 24/7.
2. Meet with attorney telephonically or via web conference.
3. Retain attorney by making payment online with debit card or echeck.
4. Provide paperwork using a secured client portal.
5. Review and sign paperwork digitally using a tool like Docusign or DocHub.
6. Appear at court hearing telephonically.
7. Receive bankruptcy discharge to become debt free.

The Head and the Heart: A Holistic Approach to Bankruptcy

We are here to help. It is a sound bite that I wholeheartedly include in many emails and conversations with clients. It is not merely a slogan or a marketing ploy. In many instances, a client is coming to us at his or her lowest point, faced with having to file bankruptcy to deal with insurmountable debt. As a bankruptcy attorney, I am here to empower the client on the path forward, providing support beyond what is required to comply with the bankruptcy laws.

In my practice, I am here for clients experiencing the joys of babies being born and for the heartbreaks of the passing of a loved one. I am here to see bankruptcy clients as more than just a bucket of debt. People seeking bankruptcy relief crave stability, clarity, and ease. This is all accomplished through providing a bankruptcy practice that provides a heart-centered process. In the end, the law is the law, but it is how a client experiences legal support that makes the real impression.

Bankruptcy is a tough legal process to navigate on your own because of the technical requirements and the legal customs that only a practitioner can know and appreciate. To assist clients as they navigate the process, we have developed a bankruptcy framework that is consistent, but at the same time highly adaptable to specific needs (be that legal or otherwise).

Initial Consultation. The bankruptcy process begins with a free consultation with one of our bankruptcy attorneys. Our client service manager works with you to schedule the appointment. During the consultation, the attorney hears your story and educated on the solutions available to you.

Hiring Attorney. After the consult, the bankruptcy attorney will collaborate with our client service manager to determine a fee tailored to your situation. If you decide to move forward with your bankruptcy, you will pay the attorneys fees and bankruptcy filing fee.

Bankruptcy Drafting. Once you have hired the firm, you will receive a comprehensive list of information and documentation specifically needed for your bankruptcy team to draft the bankruptcy paperwork.

Review and Sign Appointment. Once your bankruptcy paperwork is drafted, your bankruptcy attorney will meet with you to review it to ensure accuracy and that you understand the paperwork that will be filed on your behalf.

Bankruptcy Court. Your bankruptcy attorney will attend the bankruptcy court hearing with you. It is important to us that you feel supported and comfortable going to court.

Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you to make that decision is crucial. Instead of worrying what will come next, you should meet with a bankruptcy attorney with a heart to discover your options for dealing with your financial situation.

Nebraska Flood Relief: How a Bankruptcy Can Help

With the devastating floods hitting Nebraska, many individuals are left wondering how they are going to deal with the financial distress that the flooding has caused. Even with flood insurance, some policies may not cover the type of flooding that occurred. Farmers have lost entire herds of livestock. People have lost homes. Businesses have lost entire fleets of trucks. It can be overwhelming.

When dealing with the financial distress exacerbated by a flood, bankruptcy may be the ideal solution. A bankruptcy does not mean you are giving up, it helps provide the tools to move forward.

Chapter 7 Bankruptcy

With a Chapter 7 Bankruptcy, you are able to eliminate your legal obligation on your home mortgage, car loans, credit cards, and medical bills. Wherever you are in Nebraska, you can move forward debt free so that you can focus on rebuilding your life after the flood. The Chapter 7 Bankruptcy process from filing to discharge of debt takes 3-4 months.

Chapter 13 Bankruptcy

With a Chapter 13 Bankruptcy, you are able to handle your debts through a voluntary 3-5 year repayment plan. The Chapter 13 Bankruptcy works well for individuals impacted by the flooding in Nebraska, who have fallen behind on house or car payments, but want to cure the default payments. 

Chapter 12 Bankruptcy

For the farmer facing financial hardship because of the flood, a Chapter 12 Bankruptcy is designed to provide assistance through a plan of reorganization/liquidation. One of the main benefits is that any income tax liabilities incurred through liquidation are handled just like a credit card or medical debt.

Chapter 11 Bankruptcy

For the small business owner in Nebraska, the flood may have destroyed equipment, facilities, and vehicles. It may impact customers who no longer have the ability to pay for goods or services. It may impact labor that is unable to make it to work. This all impacts the bottom line and the ability to service debt. A small business in Nebraska may use a Chapter 11 Bankruptcy to restructure/reorganize its business, using the benefits of the bankruptcy laws to do so.

Non-Bankruptcy Debt Resolution

For those experiencing flood-related financial distress in Nebraska, your lenders or the bank may be more willing to work with you to restructure your debt or provide temporary relief.

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Bankruptcy & Foreclosure in Nebraska

In Nebraska, most home foreclosures start with the mortgage company filing a Notice of Default with the Register of Deeds in the county where the home is located. The homeowner then receives the Notice of Default by certified mail. Thirty (30) days after mortgage company files the Notice of Default, it will, through its attorney, publish a Notice of Sale for a minimum of five consecutive weeks. The home is then sold at a foreclosure auction.

This process, called a Trust Deed Foreclosure, is quick because Nebraska state law does not require that your mortgage company file a lawsuit to foreclose as there is not right of redemption. This means that once the foreclosure sale takes place, you cannot reinstate or take back ownership of your home.

A Chapter 13 bankruptcy can be a useful tool if you wish to retain your home. As long as the bankruptcy is filed prior to the foreclosure sale, you will be able to retain your home by paying the mortgage arrearage through a Chapter 13 bankruptcy repayment plan. In Nebraska, you will also be required to make your regular monthly mortgage payment.

For example: You were unemployed for eight months and could not pay your mortgage. You are now $8,000 behind and you have received the Notice of Default. You are now back to work and have started making regular mortgage payments. Because of your current income, you do not qualify for a loan modification. Coming up with $8,000 to bring your loan current is not in your budget. You can file a Chapter 13 bankruptcy, stop the foreclosure, and cure your $8,000 mortgage arrearage through a 3-5 year plan.

If you are facing a foreclosure and do not wish to retain your home because you owe more than it is worth, it needs costly repairs, or you can no longer afford  the mortgage payment, filing a Chapter 7 or Chapter 13 bankruptcy can protect you from the risk of your mortgage company suing you for potential deficiencies.

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