IO Heloc comes due in 7 years

[catleg]

Thinking about filing ch13 in a few months. House worth about 375k, with a 225k first mtg, 150k heloc which interest only with balloon in 2016. So if my plan runs 2009-2014 I can't really afford to pay down any principal. Anyone think of any good ideas? Default on the heloc, possibly make it due in full immediately? Think I can do anything with the lender to make it an installment loan? It was originated by Eloan now serviced by CLC services.

[Flamingo]

Thinking about filing ch13 in a few months. House worth about 375k, with a 225k first mtg, 150k heloc which interest only with balloon in 2016. So if my plan runs 2009-2014 I can't really afford to pay down any principal. Anyone think of any good ideas? Default on the heloc, possibly make it due in full immediately? Think I can do anything with the lender to make it an installment loan? It was originated by Eloan now serviced by CLC services.

The housing market will come back and values slowly increase. If you intend to keep your house you will be paying down principal during your Plan while your house increases in value. However, you will not decrease your principal as you state on your HELOC. It is probably a stretch to mention that you can pay more than the interest due on your HELOC to bring down the principal but that is something you would have to discuss with your attorney as you apparently have been paying interest only. It all depends on if you want to keep your house and if you can obtain any sort of modifications on your mortgages. You also have to consider the amount of the payment in 2016 - will you be able to afford it at that time? That is 7 years away...or at that time you may be able to refinance at a lower rate after your discharge. You have a few things on the plate to consider and the main one is whether or not you can actually afford to keep your house. Best of luck to you...

[catleg]

Thank you. Yes we want to keep the house. My concern is that if we pay interest only during the plan years, at the end we may have trouble refinancing. Assuming lending doesn't go back to pre-bubble practices we'd be unable to roll it over. So somehow we have to convince the court to let us pay down some principal on that loan even though it isn't contractually required. Maybe that will require cutting back somewhere else and paying a little more to the unsecureds.