Can you go bankrupt on a home equity loan?

Can you go bankrupt on a home equity loan?

The short answer is no. A debtor can discharge the home equity loan in Chapter 7 bankruptcy but they cannot discharge it AND keep their home. However, if a debtor would like to keep their home, they may be able to file Chapter 13 bankruptcy and repay both their HELOC and their mortgage over a 3 to 5 year period.

What happens if you don’t pay a home equity line of credit?

Once you default on your home equity line of credit, your creditor can accelerate the repayment phase and cut off access to further funds. If you cannot repay, they can foreclose on your home or seek a court judgment against you.

How is a home equity line of credit treated in bankruptcy?

You’ll repay those debts according to your Chapter 13 bankruptcy repayment plan over a three to five year period; any unsecured debts that are not paid after that time passes will be discharged. How your home equity line of credit is treated in bankruptcy may depend under which chapter you file and whether or not you want to keep your home.

What happens to your home equity line of credit when you default?

If you go into default, however, your lender will end the draw phase of your loan and stop you from borrowing more. You will no longer have access to your remaining $20,000 of credit. Your lender may close your HELOC altogether or just freeze it until you catch up.

Who are the major home equity line of credit lenders?

In 2008 major home equity lenders including Bank of America, Countrywide Financial, Citigroup, JP Morgan Chase, National City Mortgage, Washington Mutual and Wells Fargo began informing borrowers that their home equity lines of credit had been frozen, reduced, suspended, rescinded or restricted in some other manner.

Where is the district of Massachusetts Bankruptcy Court?

Welcome to the official website for the United States Bankruptcy Court for the District of Massachusetts. We have offices in Boston, Springfield, and Worcester. We hope that you find the information on our website useful. Contact us if you have any questions or comments about our website.

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