Chaper 7 and dismissing a HELOC

[Hobs]

Hello Everyone,

I am about to file chapter 7. After I do the lawyer is filing a motion to have the HELOC categorized as unsecured debt. (My house appraisal is less than my first mortgage).
Has anyone been able to accomplish this?

Does anyone know the Arizona statue this would fall under?

Thanks ahead of time

Hobs

[mrskal]

Wont the HELOC just be wiped out in the CH7?

[Hobs]

Not if you want to stay in the home.

[azballer]

The advice I was given was to not reaffirm either the first or second loans. The second will most likely not foreclose because they would have to pay off the first in order to do so.

I am in the same situation and my first is $470,000 with a home value of around $425,000 at the most. It will be years before the value rises to the point where the second would consider foreclosing. In fact, if it looks like they will be stuck with it for a while, the second may sell the lien to a collection agency. By not reaffirming, you could walk away in the future if they do foreclose and it could not be entered on your credit as a foreclosure since both obligations have already been discharged.

I plan on negotiating with my second/the collection agency to pay off the lien at a fraction of what I owe 3-6 months after having my BK confirmed (if I can save enough $$$ by then. Just my opinion...

[Hobs]

I understand the logic of that, but why would you not reaffirm the first?

[mrskal]

I understand the logic of that, but why would you not reaffirm the first?

The debt will have been discharged in the CH7, meaning you are off the hook for paying, you would then be able to just "stay and pay". If in time you cannont afford the house, you did not reaffirm and will be able to walk away without owing anything. Same with the HELOC.

[mrskal]

Also, I have never heard of having a HELOC changed to unsecured, so cant help ya there.

[Hobs]

It is possible to change a HELOC to unsecured and have it part of a repayment plan under chapter 13. People do it all the time. I however qualify for CH 7 and want it discharged in 2 month not 5 years.

I am formulating a plan of action and will be glad to post my intentions and also how everything plays out.

Thanks for listening.


Hobs

[mrskal]

I guess I dont understand. It will be discharged with the 7. So why would you want to make it unsecured? I am interested to find that out.

[newbie2]

It is possible to change a HELOC to unsecured and have it part of a repayment plan under chapter 13. People do it all the time. I however qualify for CH 7 and want it discharged in 2 month not 5 years.

I am formulating a plan of action and will be glad to post my intentions and also how everything plays out.

Thanks for listening.


Hobs

Do you have a Plan B?

The only way I can think of for the HELOC to be determined unsecured is if the lien wasn't perfected.

[Hobs]

I guess I dont understand. It will be discharged with the 7. So why would you want to make it unsecured? I am interested to find that out.

Mrskal, the HELOC will not be discharged with ch 7. It is secured by the home. They can foreclose in order to collect.

From what I'm gathering in this forum most people are not reaffirming HELOC, because there house is worth less than the first mortgage. Then after the CH 7 is discharged they are trying to settle with the lender.


Newbie2, This is my plan B.....

[mrskal]

So, you want to keep the house, and keep paying on the first? Am I right in saying that? You want the second to just be gone, but keep the house?

[Hobs]

So, you want to keep the house, and keep paying on the first? Am I right in saying that? You want the second to just be gone, but keep the house?

That is correct.

I talk to the lawyer this morning and we are filling today. I am continuing to pay the first and not the second. We will try to settle the HELOC before the BK case is discharged.


Hobs

[freality]

I am definitely no expert...haven't filed yet or anything...but I thought people in your situation would tend to file a Chapter 13 first to strip the second mortgage, then turn around and file a Chapter 7?

[Hobs]

I am definitely no expert...haven't filed yet or anything...but I thought people in your situation would tend to file a Chapter 13 first to strip the second mortgage, then turn around and file a Chapter 7?

Can you do that?



H