When is a HELOC Dischargeable Under Bankruptcy?
Posted By Jacoby & Jacoby on Aug 2, 2010 8:30am PDT
Chapter 13 bankruptcy provides homeowners an opportunity to either remove a second mortgage or a home equity line of credit (HELOC), or reduce the amount owed. To qualify for discharging the HELOC, the current value of your home must be less than the value of the original mortgage. When the home value is less than the current market value, Chapter 13 bankruptcy will allow you to discharge the HELOC debt. It also will allow you to repay the primary mortgage and any amount owed in back-payments over the three to five year repayment period. One additional criterion for qualifying for the Chapter 13 HELOC discharge is the good faith clause. This just means you must have gotten the HELOC with full intent of repaying the debt and honestly were not suspecting you would file bankruptcy.
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