Quick question about prefrernetial payment

[Jackdog]

For the past year or so, I've only been paying interest on the HELOC I have and was trying to pay off/down unsecured debt. Now that I've stopped paying the unsecured and I'm going to keep the home. Would it be a bad choice to pay more on the HELOC before the BK is complete. I have extra money now and would like to start putting it where I should of. It's not a big difference in payment. Instead of a little over 150 a month I'd be paying 300-400.

I just don't know how the Trustee will view this. I'm keeping my house. I'm always on time with payments. I would just like to, since I now have more money each month, start paying down on the principal again.

Thanks Everyone

[BKDefender]

Paying a secured creditor is not a preference payment.

--William

[Jackdog]

Thank You. That is the only question I forgot to ask the attorney I'm going to be hiring.

[justbroke]

It may be bad to pay more on the HELOC from a strategy standpiont, but as BKdefender writes, it's definitely not an avoidable preference. You may be throwing money away by paying down the HELOC, especially if you're underwater and seeking to discharge the HELOC. Of course a really good asset planning/bankruptcy attorney could help you with the planning aspects of this.

I will say, though, that in most case, paying off or paying down a HELOC on an underwater property is a waste of money, even in a Chapter 7. The success rate of post-discharge debtors settling their HELOCs for 10% is becoming common in this economy. Why pay 100%, when you could pay 10%???

[Jackdog]

My house isn't underwater. Well it is worth a little less than what I paid for it. But I only owe 59k on the HELOC and the house could easily sell for 80-100k. I should of posted that sorry.

I have to keep my home. No children and have 4 dogs they are the second most important thing in my life behind boyfriend. No one would rent to me with four huge dogs. We can easily afford the house and after BK pay even more each month to the principal. Even if I pay 500-600 on the HELOC that's still cheaper than what we could rent a home in this area for a month.

[LadyInTheRed]

The success rate of post-discharge debtors settling their HELOCs for 10% is becoming common in this economy.

Justbroke, do you have a source that confirms that? I could qualify for a 7, but am filing a 13 to strip a far underwater 2nd (not a HELOC, but I don't think that would make a difference). If I could get comfortable with the prospects for settling after a Chap 7 discharge, I might go that direction as I have enough exempt cash to pay 10%.

[justbroke]

Justbroke, do you have a source that confirms that? I could qualify for a 7, but am filing a 13 to strip a far underwater 2nd (not a HELOC, but I don't think that would make a difference). If I could get comfortable with the prospects for settling after a Chap 7 discharge, I might go that direction as I have enough exempt cash to pay 10%.

Just search this BKForum for 2nd mortgage settlements. They are becoming more common, especially if you have discharged the debt in a Chapter 7.

That's not to say that strategically, a Chapter 13 isn't better. In the end, a Chapter 13 you can pretty much be certain that your lien will be stripped if you complete the plan and receive the discharge. In a Chapter 7, you're taking a chance. You're taking the chance that the 2nd (or junior) lienholder doesn't foreclose or doesn't accept any "reasonable" settlement offer. It's just the nature of the game.

In the end, the question is always, are you willing and able to just walk away? That puts you in the driver's seat. If you want something more concrete, the Chapter 13 lien strip is more... predictable and reliable... if you can deal with being in the Chapter 13 for 3-5 years.