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CalAttorney2, Attorney
Category: Bankruptcy Law
Satisfied Customers: 10244
Experience:  Civil litigation attorney for individuals and businesses.
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I filled 7 bankruptcy in 2013 it was discharged in 2014. I

Customer Question

I filled for chapter 7 bankruptcy in 2013 it was discharged in 2014. I have a home and a HELOC . We have missed no payments on the regular mortgate choosing to continue to make the payments after the bankruptcy. We have continued to make payments on the HELOC because we wanted to retain our home. In November 2016 the HELOC notified us that the payments would be going up $175.00. We were doing ok with our finances and making every payment, until it was raise 175.00. We are on SS and have a "non-negoiatable" budget which just can not handle an additional 175.00. I made application to the lien holder of the HELOC for modification and the say they can not do it as it is a HELCO not a regular home mortgate. What Do I do now. I was under the understanding that a Vendor/or person money was owed to could not do this after a bankruptcy was discharged even if you continued to make the original payment.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

I am sorry to learn of this situation. I assume that when you filed you chose to do so without an attorney.

Your course of action, and set of presumptions regarding how secured debts will be discharged in a Chapter 7 "liquidation" chapter are inconsistent with bankruptcy law.

If you file for a Chapter 7, it is sometimes possible to "reaffirm" a debt, where you enter into a formal agreement with the creditor to continue paying on the loan and waive the discharge that you would have received for that loan. (An example, would be if you had a car that had a loan on it, and you needed a vehicle, you would "reaffirm" the car loan so that you could keep the vehicle after bankruptcy).

However, in your case, you want to both keep the secured asset (your home) and discharge the loan (the HELOC). This does not work, you either pay the loan, or lose the asset (the asset is sold by the trustee and the proceeds are used to pay your creditors).

It is possible to work out a payment plan under Chapt. 13 a "restructure" chapter, and I would strongly encourage you to pay a local bankruptcy attorney to try to help you unwind the current position that you have placed yourself in. This is going to require some procedurally adept work from your bankruptcy attorney and I don't recommend trying this on your own.

If you are in a "no negotiation" budget, this may not be possible, but you should at least explore it. Your other option is that the HELOC is going to go into default and they will then have the option of foreclosing on your home.