Home Equity Line

[Lawrence21]

Crazy question, but what the heck. I am about halfway through our 5-year CH-13 100% plan. Would the Courts consider the fact that I have about $250K equity in my home (which isn't part of the BK) and allow me to take out a home equity line of credit to pay off the remaining balance of my 100% plan?

[justbroke]

Its not that often, but people pay off Chapter 13s by refinancing or selling property. You just need permission from the Trustee and maybe permission from the court as well. Contact your attorney.

[flashoflight]

Crazy question, but what the heck. I am about halfway through our 5-year CH-13 100% plan. Would the Courts consider the fact that I have about $250K equity in my home (which isn't part of the BK) and allow me to take out a home equity line of credit to pay off the remaining balance of my 100% plan?

Your chances of finding a lender who will do the HELOC with an open bankruptcy is pretty close to zero. Remember they can't take the house due to the automatic stay until after your case is over on top of being in second position, which is a whole lot riskier for the bank.

You need to refinance your existing mortgage with FHA/VA cashout or if the house is free and clear, cashout with a FHA/VA mortgage. If you have a low interest mortgage, I think you will probably be better off doing the whole 5 year prison sentence.

[justbroke]

If you have a low interest mortgage, I think you will probably be better off doing the whole 5 year prison sentence.

This is a great observation.

Lawrence21 you would need to run the numbers. The interest rates are well over 6% and on a second mortgage (Home Equity Loan) combined with an active Chapter 13... could push the rate higher. Even with the closing costs, the additional 2.5 years in the Chapter 13 may be more economically sound.

If you have something strategic that's worth the chance of having a 7.4%-8.0%+ rate (today's average FHA rate) then I would still crunch the numbers.