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.
If, after completing your Chapter 13 bankruptcy repayment plan, there is a balance on your HELOC loan that may be discharged, effectively reducing the amount you pay out to the lender. But remember, in Chapter 13 bankruptcy, you will repay on all of your creditors, including credit cards. Also, your Chapter 13 bankruptcy repayment amount will be determined by your income and ability to pay. If you HELOC is a second and not a first mortgage , there are some cases in which you can strip it off in a Chapter 13 bankruptcy.
You will be required to pay some of it, but, generally, most Chapter 13 filers only end up paying a tiny fraction of the original debt back. However, the process may not be as simple as it sounds. Depending on the court and the judge presiding over the case, they may ask for additional information or require that you file an adversary proceeding in order to strip off the HELOC.
The bottom line is, you will need to prove to the court that the HELOC is no longer secured against the value of your home and will require an appraisal in order to move forward with the process of stripping of the HELOC.
In cases where your outstanding debt on your first mortgage is very close to the value of your property, they may require a second appraisal before moving forward. Judges can be prickly about stripping liens off of property when the borrower consented to the lien.
HELOCs that are used as second mortgages are subordinated to primary mortgages in the hierarchy of repayment. This is as true when a house is foreclosed on as it is when a debtor files for bankruptcy. They must use that legal tool very carefully.
If they do force the home into foreclosure, you can stop the foreclosure by declaring bankruptcy. If your income increases during your Chapter 13 bankruptcy that increase must be reported to the bankruptcy trustee and it may impact how much you pay to your creditors. After filing your bankruptcy forms, you will need to complete a Debtor Education Course from an approved credit counseling agency.
The purpose of the course is to educate you on making smart financial decisions going forward but does not provide legal advice about the bankruptcy process.
Your meeting, or meeting of creditors , will take place about a month after your bankruptcy case is filed. Due to the COVID pandemic, all meetings are held either by video conference or via telephone until at least October. The main purpose of the meeting is for the case trustee to verify your identity and ask you certain standard questions and most last only about 5 minutes. Your creditors are allowed to attend and ask you questions about your financial situation, but they almost never do.
You should also bring a copy of your bankruptcy forms to the meeting, along with your last 60 days of pay stubs, your recent bank statements, and any other documents that your trustee has asked for. The bank will either file request with the bankruptcy court to ask permission to retake the car, or wait until your discharge is granted before picking it up.
If you want to keep the car, you can either reaffirm the loan or redeem the car. You have to complete and sign the agreement and return it to the bank within 45 days from your meeting. The bank files the signed agreement with the court for approval.
To redeem the vehicle you have to file a motion with the court and, once granted, buy the car from the bank for its current value.
This gets you out of having to pay the amount left on the loan, but payment has to be made in one lump sum. Upsolve Community Member How difficult is it to do my own chapter 7?
Chapter 13 bankruptcy is another type of bankruptcy available to consumers. The main difference to Chapter 7 is that you pay back some of your debts through the Chapter 13 trustee.
This is determined by the means test analysis, your actual income and expenses and the terms of your repayment plan. Since Chapter 13 payment plans can be pretty complicated, anyone considering a Chapter 13 filing should talk to a bankruptcy attorney first. Most American consumers get their fresh start by filing Chapter 7 and eliminating credit card debt, medical debts, and most other unsecured debt.
Filing for bankruptcy takes some preparation. Hiring a good bankruptcy attorney is one way to file. But if you can't afford the attorney fees to hire one and you need a fresh start, Upsolve may be able to help. If you're eligible , our free web app will walk you through the process and help you prepare your forms for filing with the court.
Attorney Andrea Wimmer. Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor.
While in private practice, Andrea handled Take our screener to see if Upsolve is right for you. Upsolve is a c 3 nonprofit that started in Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app.
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Free Articles. Bankruptcy Tool. Filing Guide. In a Nutshell Chapter 7 bankruptcy is a powerful debt relief tool for American consumers and businesses alike. Collect Your Documents Your first step is to collect all your financial documents so you understand the current state of your finances. In addition to your credit report, you will need the following documents: Tax returns for the past 2 years Pay stubs or other proof of your income for the last 6 months Recent bank account statements Recent retirement account or brokerage account statements Valuations or appraisals of any real estate you own Copies of vehicle registration Any other documents relating to your assets , debts, or income.
Take Credit Counseling Every person who files for bankruptcy has to take a credit counseling course in the 6 months before their bankruptcy petition is filed with the court. Also, depending on your income and other factors, the length of the plan may be 60 months. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
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