You can halt Nevada foreclosure proceedings on your home by filing for chapter 13 bankruptcy. You would then be put on a payment plan to give you a chance to catch up on your debts, and – as long as you remain current on your mortgage payments – you can remain in your home without fear of foreclosure.
In this article, our Las Vegas bankruptcy attorneys discuss:
- 1. Can bankruptcy stop foreclosure in Nevada?
- 2. Am I eligible for chapter 13 bankruptcy in Nevada?
- 3. Can I get rid of my second mortgage through chapter 13?
- 4. What is the Nevada homestead exemption?
- 5. What is the chapter 13 bankruptcy process?
- 6. Can I also stop foreclosure through a chapter 7 bankruptcy?
1. Can bankruptcy stop foreclosure in Nevada?
In many cases, yes. Filing for chapter 13 bankruptcy immediately halts the foreclosure process through an “automatic stay.” This means that as soon as you file for chapter 13 bankruptcy protection, your mortgage lender is required to cease the foreclosure proceedings and stop hounding you for payment.
The purpose of chapter 13 bankruptcy is to give you time to “catch up” on your payments to creditors, such as mortgage lenders. You and your bankruptcy attorney work with a court-appointed case trustee to restructure your debts and implement a doable payment plan based on your income.
Chapter 13 payment plans last three or five years, depending on your case. You make monthly or bi-weekly payments directly to the case trustee, who then distributes the payments to your creditors. As long as you stay current on your payments, you get to stay in your home, and the bank may not proceed with foreclosure.1
2. Am I eligible for chapter 13 bankruptcy?
To stop foreclosure proceedings against you by filing for chapter 13 bankruptcy in Nevada, your secured debts – which includes mortgage debt – must amount to less than $1,842,200. (Also, your unsecured debts – which include things like medical and credit card bills – must amount to less than $394,725.)
Note that you are disqualified from bankruptcy protection if – in the prior 180 days – either:
- you had a prior bankruptcy petition dismissed triggered by a deliberate failure to show up to court or comply with court terms;
- you voluntarily dismissed a past bankruptcy after lien-holding creditors sought relief from the bankruptcy court; or
- you received no credit counseling from an approved credit counseling agency.
Since chapter 13 bankruptcy involves abiding by a payment plan, it is most suitable for people who have a steady income source.2
3. Can I get rid of my second mortgage through chapter 13?
If your home value amounts to less than the primary loan balance, you may be able to eliminate your second mortgage (or other junior lien) through “lien stripping.”
Your bankruptcy attorney would file a motion in court showing evidence of your home’s value and mortgage debt. And if the court agrees to void the second mortgage, that debt would be treated as “unsecured debt.” This means that once your chapter 13 case ends, any remaining debt to the second mortgage lender would be wiped out.3
4. What is the Nevada homestead exemption?
When homeowners file for bankruptcy in Nevada, $605,000 worth of the property’s equity is exempt from bankruptcy. (Home equity is the difference between the home’s current value and your outstanding mortgage loan.)
So if you file for chapter 13 bankruptcy, you would pay the nonexempt part of your home’s equity (if any) as part of your payment plan. Though if your nonexempt equity is very high and your income is comparatively low, keeping your home may be an unrealistic goal.
But before you can take full advantage of Nevada’s homestead exemption, you must have:
- filed a homestead declaration with the county recorder’s office;
- lived in Nevada for at least 730 days prior to filing for bankruptcy; and
- bought and owned the home for no less than 1,215 days before the filing.
Otherwise, you would use the federal homestead exemption – which is only $189,050 through March 31, 2025.4
5. What is the chapter 13 bankruptcy process?
The first step is to file the bankruptcy petition with the federal bankruptcy court in Nevada. Your homestead exemption would go on Schedule C of your bankruptcy forms. The filing fees total $310. Once you file, the foreclosure process is stayed.
Next the court appoints a case trustee, who holds a creditors meeting within 21 to 50 days of the filing. During the meeting you must answer questions under oath posed by the trustee and creditors (which can include your mortgage lender). By 30 days after the filing, you start making payments to creditors.
The court holds a confirmation hearing within 45 days after the creditors meeting to adopt the payment plan. And as long as you stay current on payments during the three-to-five-year plan, your unsecured debts (which do not include mortgages) will be discharged in bankruptcy.
Note that you make payments directly to the case trustee, who then disburses the money to your creditors. And if you stop making payments, the court can dissolve the bankruptcy or convert it to a chapter 7.5
6. Can I also stop foreclosure through chapter 7 bankruptcy?
Possibly, but most filers go the chapter 13 route. This is because filing for chapter 13 halts foreclosure proceedings in Nevada even if you are late on payments – which most people are by the time they consider bankruptcy.
In contrast, you must be current on your mortgage payments to prevent a foreclosure action through chapter 7 bankruptcy. In addition, your home equity cannot exceed $605,000 – Nevada’s homestead exemption.
If you file for chapter 7 bankruptcy, and the Nevada homestead exemption does not cover your equity, then the court-appointed case trustee can sell the home and pay your creditors with whatever proceeds are left after the exemption amount.
Note that if you file for chapter 13 bankruptcy but cannot keep up with payments, the court may convert the case to a chapter 7 bankruptcy. Also note that chapter 13 bankruptcies stay on your credit report for 7 years, whereas chapter 7 bankruptcies stay on your credit report for 10 years.6
- See 11 U.S.C. Chapter 13.
- 11 U.S.C. § 109(e). 11 U.S.C. §§ 109(g), 362(d) and (e). 11 U.S.C. §§ 109, 111.
- See, for example, In re Okosisi (United States Bankruptcy Court for the District of Nevada, 2011) 451 B.R. 90.
- NRS §§ 21.090(1)(l), 115.005, 115.010, 115.050. Bankruptcy Code § 104(b). Adjustment of Certain Dollar Amounts in the Bankruptcy Code, Federal Register (February 4, 2022). In re Stanton (United States Bankruptcy Court for the District of Nevada, 2011) 457 B.R. 80.
- See note 1.
- See 11 U.S.C. Chapter 7.