HELOC before BK

[Dollar Bill]

Greetings...

I plan to take out a "home equity line of credit" on my second home. The motivation is to be able to reafirm the house. I owe 56,600 on the 1st mortgage. It's worth $85,000. I plan to get $20,000. That will total approx $76,600. There will be $8400 of equity.

I plan to use the funds toward a down payment on a primary residence I will purchase.

My question is:
My Ch. 7 will be for approx $600k Will the trustee bother with the $8400 left? Can I reaffirm?

Is a HELOC differ with a 2nd loan in a ch7?

Any help would be appreciated.

Dollar Bill

[CindyLou]

Just to clarify, your chapter 7 will be for 600,000 or 60,000?

[CindyLou]

I just looked at your previos post, so now I know its 600. It looks to me that you would be treading on thin ice. Remember you only have homestead on your primary residence. Taking a HELOC on an investment property on the eve of BK can be tricky...I would certainly not do something like this without except under the strict advice of an attorney!!! That 8400 would certainly not be exempt unless you had some kind of wildcard...I'm not sure what state you are in, but if you are putting 20,000 down on your primary residence then I'm sure your wildcard would be used up anyway. This just doesn't sound right to me. What is the state of your primary residence?

And yes, 8400 is a sizeable amount of money that I think the trustee would pay attention to no matter what the size of your BK is.

[Dollar Bill]

Thanks for the response.

I did mention it to two attorneys. They both seem to think it will be fine.
One mentioned reaffirming the home due to the diiference in what I will owe, and what it is worth. It's in Houston, and the market is horrible.

DO YOU KNOW HOW THIS WORKS? SO FAR AS THE TRUSTEE SECURING THE $8400.

DO THEY DEMAND WE TAKE OUT THE EQUITY IN SOME SORT OF LOAN. DO THEYB ATTACH A LIEN FOR THE AMOUNT OR DO THEY SIMPLY TRY TO SELL THE HOUSE. THEY CAN'T SELL FOR LESS THAN WHAT I OWE RIGHT?

[B12]

Very confusing.

Are you filing BK on the C corp?

Is the "second home" a second home or investment property?

You say you want to reaffirm the second home, (is that right), then why the question about the bank selling the home for less than what it is worth?

[Dollar Bill]

I am filing a CH 7, due to personal guarantees on C-corp debt (lines of Credit)

It is a second home in TX. I live in CA where I rent. I am going to now buy in CA before filing. The question is whether or not the trustee could sell the home for less than what I owe on my 1st mortgage and HELOC. I owe $76600, worth approx $85000. How does the trustee secure the $8500 of equity. I can borrow the money from family and buy the equity. If that's not the case what does the trustee do?

[Dollar Bill]

Lien Stripping Question. HELOC vs. Loan

There is a thread that concerns lien stripping. It's the first time I had ever heard of such a term.

Does anyone know whether a HELOC is more prone to this "lien stripping" vs a 2nd home loan?

I always thought a HELOC would pretty much attach or is sucured by the property and records as a lien.

Anyone?

[B12]

Ok, forgive my denseness here if I am still not understanding this.

You are filing personal chapter 7, but want to take out a home equity loan on your house to put down on a new house.

First of all, the house in TX is not your second home, since you are renting in CA. If it is empty and sitting there, it is still your primary personal residence. If it is rented out, then it is your investment property.

You need to find out how much of your equity is protected on your house in TX if it is not rented.

Others will chime in here to tell you about the house equity exemption in TX.

Can the trustee or any lien holder sell your asset for less than market value? Absolutely. They will take any amount of money they can to offset your debt. They do not have time to sit around and wait for a certain price.

If the house is a rental, there are lenders out there who will give you a home equity loan on an investment property.

One thing is still not clear. Are you saying that you want to strip the equity of the old house, buy the new house and then foreclose on the old house?

If so, and you are doing a personal chapter 7, again, others here will chime in about the waiting times so that the subject of fraud does not come up.

[Dollar Bill]

B12...Thanks for the reply.

About the trustee selling. I can understand that if I owned a property out right, they will sell and take what they can. My issue is whether or not they can sell it for less than what I owe to my 1st and 2nd mortgage combined? I really didn't think so, but I wanted to be sure.

Sounds like your saying they can?

[B12]

If you owe more than it is worth, and you want to keep it, you can if the payments are up to date.

Or if you stop paying after you get your equity out, they will foreclose on you.

The trustee only wants assets they can sell to obtain money.

[Dollar Bill]

B12...Thanks again.

Last Question. How does a trustee go about securing the $8400 of supposed equity in the home after the two mortgages?

[B12]

Honestly, if you want to keep the house and cannot exempt the equity in the home, I still see no problem. There really is no money in it.

If you are concerned that they will take your house asset and sell it, again, there is no money in it for them.

The selling fees alone are going to be more than 8400. You have realtor fees, tax stamps, recording fees, transfer tax (depending on your state) and........

that is IF your house is worth 85,000. The market value of a house, although it can be determined before the sale, is still subjective.

The true price of a house is what a willing, able and qualified buyer will pay for it. The market is steadily declining everywhere except in a few places.

If you are worried that you cannot get at the remainder of the equity in the house, you are worrying needlessly. There is no or very little money to be had unless you sit there and sell it yourself. You would be saving the realtor fees at most.