Settling a second mortgage before filing

[Lana]

I should be filing this month - however I have come into a little bit of money and it looks like I will have to spend it. I dont want to blow the money.

I was originally going to let the house go, but without the second I'm not upside down.
If I could eliminate my second mortgage I would cure the first and keep my house. I was thinking of offering them a 10% settlement now before I file.

If I did in fact settle with them - it is a secured HELOC, would that be a preferential payment and screw up my bankruptcy?

[NoMoreCards]

I believe that preferential payments only apply to unsecured. Since the HELOC is secured, that would not be considered preferential.

[justbroke]

It's not preferential. The reason is because a HELOC is a secured debt. Only payments to unsecured creditors could be considered preferential!

As to should you do this? I don't think so. Unless you're in a State with a very generous homestead exemption, you may just be creating too much equity!

[Lana]

Its 75k in Connecticut. If I got rid of the HELOC I would owe 200k on a 200k house.

However I have been looking around. Even renting something similar would be more expensive. I may as well stay if I can get rid of the 2nd. the first is reasonable.

[HHM]

I think you are overestimating your chance of actually settling with the HELOC. You will probably need to find another way to spend the money. HELOC's and 2nd mortgages rarely, if ever, settle before a BK unless you do a short sale.

[Lana]

They were willing to settle last month. I just didnt have the money. Now its in collections though. Worth a shot anyway.