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Can I file Chapter 7 on my home equity loan and still keep my home.

El Cajon, CA |

I owe more on my house than it is worth. I would like to keep the house, the law group I'm working with say I can keep the house. Is this true?

Attorney Answers 5


Your title and posting are two different questions. As to your first question, if you file Chapter 7, you can keep the home if you are current on the mortgage when you file, and if you continue to pay. In Chapter 7, you would have to pay off the HELOC to keep the home.

If the value of the home is less than the first mortgage, you may be able to file Chapter 13 and "strip" off the HELOC so that you are not liable for paying them.

As to your second question, it does not matter if you owe more than the house is worth when it comes to keeping the home. There are many, many considerations to take into account in deciding which chapter to file, whether you can keep the home, and whether you can strip off
the second/HELOC. Talk in depth with your attorney about this. Good luck.

This information is not, nor is it intended to be, legal advice. This does not constitute the formation of an attorney-client relationship. You should consult an attorney for individual advice regarding the specifics of your situation. JC Law Group is a debt relief agency. We help people find relief by filing bankruptcy in California under the Bankruptcy Code

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You can keep the house if you can afford to pay for it.

That's because a Chapter 7 order of discharge will only discharge your personal liability for the home equity loan. The home equity loan will remain secured by your house. So if you file Chapter 7, but you're not current with the home equity loan and/or you can't keep up with the payments, then the lender may pursue a Motion for Relief from Stay and obtain a Court order that would allow the lender to go ahead with a foreclosure sale.

The lender could also wait until the Chapter 7 is over, and still sell your house at a foreclosure sale.

So if want you really mean to ask is whether you can get rid of the home equity loan, then you need to consult with your counsel about the possibility of filing Chapter 13, instead of Chapter 7, with a Motion to Value Collateral (aka "lien stripping") to get rid of the home equity loan.

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If your house is worth less then the first mortgage then you can get rid of a second mortgage. You can always choose to keep the property even if it is upside down but you will have to remain current with all secured debts (unless the circumstance I described earlier applies) and you will have to cure the arrears.

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You can only discharge your personal obligation with respect to the home equity loan. However, the lien will remain on the property. If you want to keep the property you will need to continue paying the home equity loan. You may want to try to modify the loan or settle it. You should speak with an attorney about your specific options. Good luck.

Alon Nager
Russack Associates, LLC
100 Severn Ave., Ste. 101, Annapolis, MD 21403

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.

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I agree with Mr. Curls' response.

Mr. Larkin is a San Diego Bankruptcy Attorney and is licensed in California. His response here does not constitute legal advice and does not create an attorney/ client relationship. The response is in the form of legal education and is intended to provide general information about the matter in question. Many times the questioner may leave out details which would make the reply unsuitable. Mr. Larkin strongly advises the questioner to confer with an attorney in their own state to acquire more information about the specifics of their case.

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