Jump to Navigation

Is Chapter 13 bankruptcy an option for home equity debt?

Many Tennessee residents take out home equity loans for necessities such as home improvements, large purchases and sometimes even to pay off other debts. This may seem like a good idea but issues arise when the loan is not paid on a monthly basis. Even f the home is otherwise paid off - with no other mortgage - it may still be subject to foreclosure with a home equity line. But homeowners do have options to handle these situations.

First of all, if a home has an equity line on it, it is not legally paid in full. Home equity loans are secured debts because if they're not paid, the lender can go after the house. Therefore, a homeowner who stops making payment on the home equity loan will face foreclosure.

If a homeowner falls behind on an equity loan worth tens or even hundreds of thousands of dollars, the homeowner can file for bankruptcy. A Chapter 13 bankruptcy would give the homeowner up to five years to pay back the loan. However, the owner would have to pay the regular monthly payment along with a second payment to cover the delinquency. This is not always possible for those in debt.

Many people take out home equity loans without thinking about the consequences. It can be easy to take out cash on a loan, causing homeowners to quickly rack up debt. In addition, a home is used as collateral with these loans, which means that the owner can potentially lose the home. Therefore, instead of an equity line, a person may wish to seek out unsecured loans if they need access to cash.

Source: Fox Business, "Can't Pay Off Home Equity Loan -- File Bankruptcy?," Justin Harelik, Nov. 20, 2013

No Comments

Leave a comment
Comment Information

What's Your Situation:

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close
Subscribe to This Blog's Feed Visit Our Bankruptcy Website

Our Office Location:

Richard Banks & Associates

393 Broad Street, N.W.
Cleveland, TN 37364-1515
Map & Directions

Phone: (423) 244-0009
Toll Free: (866) 596-8527
Fax: (423) 478-1175

FindLaw Network

Privacy Policy | Business Development Solutions by FindLaw, a Thomson Reuters business.