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Equity Law

In many cases of bankruptcy equity is often a topic of interest. Those contemplating filing bankruptcy are often unsure of which kind of bankruptcy is right for them. There are many factors to consider. Is there equity in the home? Is there a Home Equity Line Of Credit (HELOC)? Knowing what your equity is will help in the determination of how to proceed with a bankruptcy choice. These factors often lead to questions like the ones answered below.

I live in Missouri and owe 100k on my house and 68k in a home equity line of credit. In a chapter 7 bankruptcy will I be able to keep my house?

In a Chapter 7 bankruptcy an individual will need to make payments on both the mortgage and the home equity line of credit (HELOC) in order to keep the home. If payments are not made then the lenders can proceed with foreclosures on the mortgage and the HELOC because the debts are secured by the house.

In a Chapter 13 bankruptcy a different scenario can happen. If your house is worth less than the mortgage and HELOC, then you can classify the HELOC as an unsecured debt. This will allow you to pay off the HELCO at the same interest rate as credit cards under whatever your chapter 13 plan may include. This is typically referred to as cram down or lien strip.

Does having equity in my home prevent me from being able to file for bankruptcy in New Jersey?

Equity will play a part. You will need to find out how much equity you have in your home. If you were to sell your house, how much would you make over what you owe? This would be your equity. In New Jersey you can use the Federal exemption (Homestead exemption). This exemption allows for the equity in the home to be exempt up to $21,625. However if you are married, filing jointly then this can be doubled.

I own a house in Texas with lots of equity in it. Can I file for bankruptcy even though I have all this equity?

There are different factors that will come into play. Whether the home is in a town, city or village, and how many acres the home is on. The Texas homestead exemption is unlimited for any home in a town on less than 10 acres. Texas Prop. 41.001 This means you would not lose your home no matter how much equity you had in it.

My ex-wife has just been discharged from all in a chapter 7 that she filed. She was primary on both the mortgage and equity line of credit. Can I file for chapter 13 and keep the house even though she filed a chapter 7?

Your ex-wife’s bankruptcy discharged her liability for paying the home equity loan, but it did not take away your liability in paying it. Since you are also co-borrower on the mortgage and HELOC then you also have a right to file for bankruptcy to discharge your liability to the loan. Filing a chapter 13 can allow you to keep the home. The balance of the unsecured portion of the home equity loan will be stripped (lien strip).

Having the right information and understanding of equity can help when dealing with questions regarding equity. Experts can help answer questions about the effect equity may have when filing bankruptcy or how home equity lines of credit can be discharged in bankruptcy. Get the answers fast and affordably by asking an Expert online.
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