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What Options Does Anyone Have Regarding My HELOC and Bankruptcy? – Sam

By on November 4, 2010
What Options Does Anyone Have Regarding My HELOC and Bankruptcy? – Sam

HELOC and bankruptcy

i have two helocs and a primary mortgage on my home. primary is $350k. one heloc is $50k and other is $40k. home value just around $400k. credit card debt is around $45k. so in a mess to say the least. i was told that if i claimed bankruptcy, the heloc companies would settle my debt for far less than what is owed. how true is this? what options can anyone suggest?

What options do i have regarding my loans? and also regarding bankruptcy? i appreciate any help.

thanks

Sam




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About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

4 Comments

  1. Steve Rhode

    November 5, 2010 at 11:27 am

    And that’s why I love the site readers, excellent advice to consider.

  2. stanny1

    November 4, 2010 at 11:44 pm

    If you go Chapter 13, you can get the 40k Heloc erased because there is no equity supporting it. You will still owe 400k or what the property is worth. Now the tricky part. Can you afford the remaining two loans? Do you want to stay in the house? True, the lender may negotiate on the second Heloc but do you have cash to pay it off? Most people don’t. If you don’t plan to stay or can’t afford the payments, you could do a short sale and let the top two lenders battle it out on who takes the loss. Chances are, the 40k Heloc will disappear. But they could blackmail the transaction for a token payoff from Heloc #1. You could list the property as a short sale and have your agent start negotiating with the lenders early. If you hit a snag on Heloc #2, then BK 13 and get rid of the roadblock while doing the short sale. Just the threat may get rid of Heloc #2 and you can proceed. One other possibility. Stop payments and see if if you can buy time. We may go into a double dip and prices will fall. Then you might BK13 out of both Helocs.The other possibility is that QE2 will happen and the value of your home will increase. In that case, get the 13 going and erase Heloc #2 and enjoy the equity ride without the 50k debt. Timing here is everything.

  3. Anonymous

    November 5, 2010 at 3:44 am

    If you go Chapter 13, you can get the 40k Heloc erased because there is no equity supporting it. You will still owe 400k or what the property is worth. Now the tricky part. Can you afford the remaining two loans? Do you want to stay in the house? True, the lender may negotiate on the second Heloc but do you have cash to pay it off? Most people don’t. If you don’t plan to stay or can’t afford the payments, you could do a short sale and let the top two lenders battle it out on who takes the loss. Chances are, the 40k Heloc will disappear. But they could blackmail the transaction for a token payoff from Heloc #1. You could list the property as a short sale and have your agent start negotiating with the lenders early. If you hit a snag on Heloc #2, then BK 13 and get rid of the roadblock while doing the short sale. Just the threat may get rid of Heloc #2 and you can proceed. One other possibility. Stop payments and see if if you can buy time. We may go into a double dip and prices will fall. Then you might BK13 out of both Helocs.The other possibility is that QE2 will happen and the value of your home will increase. In that case, get the 13 going and erase Heloc #2 and enjoy the equity ride without the 50k debt. Timing here is everything.

    • Steve Rhode

      November 5, 2010 at 3:27 pm

      And that’s why I love the site readers, excellent advice to consider.

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