If I understand your question, you are going to file a Chapter 7 bankruptcy and surrender your home. The home has a mortgage and HELOC, and you want to know what happens to the HELOC in Chapter 7. It is discharged, and the debt is forgiven.
You asked whether the home is "charged off." If you are asking whether the lender on the HELOC can "charge off" the HELOC, yes, if you are behind on payments. A "charge off" is essentially an accounting method used by creditors to realize a loss.
If you have not retained counsel, I recommend you do so. 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.
Your Chapter 7 will DISCHARGE the loans, if approved by the court, so you will not have a tax consequence. "Charge off" is an accounting term that the banks and lenders use to show that after the required period of no payment being received, that company considers the account or loan a bad debt. Sometimes, there is taxable income that results from a charge off, although not in your case.
Hopefully, you have a lawyer advising you and preparing your papers, because there are exemptions that will permit you to keep a certain amount of cash and personal property through the bankruptcy. The attorney can also advise you on moving out to a rental unit, unless the mortgage lender is willing to rent the house back to you after it takes title to the property.
I think by now you have gotten the message--all of your dischargeable debts, HELOC, first mortgage, credit cards, will go away, in layman's terms. Some debts such as student loans and certain tax obligation can not be discharged. Loans for mortgages, cars and the like are dischargeable.
There is no tax consequence to debts canceled by way of a bankruptcy. There is a form 982 to file with your tax return next year to show the debts discharged.
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.
If you are current on your 1st, why are you filing BK now?
You 1st Mortgage will be 4-5 months delinquent before the Lender even begins the foreclosure process. You are wasting about 8 months of rent proceeding on your own. You need professional guidance and counseling. -KNOW your options before you proceed.-