Most Chapter 7 bankruptcy filers can keep a home if they’re current on their mortgage payments and they don’t have much equity. However, it’s likely that a debtor will lose the home in a Chapter 7 bankruptcy if there’s significant equity that the trustee can use to pay creditors.

Can you file Chapter 7 on a home equity loan?

If you file for Chapter 7 bankruptcy, you cannot get rid of second mortgages, home equity lines of credit (HELOCs), or home equity loans. Filers in the Eleventh Circuit Court of Appeals, are no longer able to strip off (remove) these types of liens in Chapter 7 bankruptcy.

Do you have to include all your debt in Chapter 7?

You must list all debts on your Chapter 7 bankruptcy schedules without exception—even if you think they won’t get wiped out by your discharge. If you leave off a debt, you run the risk of remaining responsible for it.

What happens to a HELOC in a Chapter 7 bankruptcy?

The HELOC in a Chapter 7 Bankruptcy. In a Chapter 7 bankruptcy, the bankruptcy trustee liquidates unsecured assets to pay creditors. However, because bankruptcy law “exempts” certain types of property up to certain values from liquidation, the vast majority of debtors who file for Chapter 7 are allowed to keep all of their property.

How is a home equity line of credit ( HELOC ) handled?

However, some of your secured debts such as your HELOC may be discharged under certain circumstances. For example, if your home’s value is less than your HELOC, you may be allowed to strip the loan and treat it as an unsecured debt. This means that the HELOC will be treated like any other unsecured debt such as credit cards.

When do you have to make HELOC payments in Chapter 13?

It is important to remember that in addition to the Chapter 13 plan payment, you will be required to make the regular monthly HELOC payments, beginning with the first payment due after your bankruptcy filing date. Also, depending on your income and other factors, the length of the plan may be 60 months.

Can a home equity line of credit be wiped out in bankruptcy?

If you decide to return your home to the lender, your HELOC may be wiped out in bankruptcy. This means that, because you surrendered the home to the lender, you may not be responsible for paying the home equity line of credit. Chapter 13 bankruptcy. Filing Chapter 13 bankruptcy will require you to repay your debts over a three to five year period.