Bankruptcy Equity Home Loans Explained
Written by admin on Wednesday, January 6th, 2010 in Bankruptcy.
There are a number of people who see bankruptcy as the only option for getting out of debt any time soon. But deciding to declare bankruptcy is not simple. It is also very difficult to get credit again afterward. Difficult, but not impossible. An equity home loan is a certain kind of credit that is available when going through a bankruptcy. You need to be aware of some important information about bankruptcy equity home loans.
Bankruptcy equity home loans can be used to discharge a chapter 13 bankruptcy ahead of schedule. When declaring a chapter 13, you are allotted between 36 and 60 months to satisfy all debts. There are specific circumstances where a person can have his/her lawyer file paperwork to request the right to obtain a new debt in order to pay off the old debts faster and with an interest rate that is lower.
If this request is granted, the lawyer will then confer with financial institutions to locate a bankruptcy equity home loan that is agreeable to
helping the debtor eliminate the debt in the time allowed, and can give a decent amount of cash to eliminate many of the original unsecured debts.
If the debtor currently has a home equity loan at the time of bankruptcy, you need to be aware that this is a secured debt. This means that the only way to discharge this debt through bankruptcy, under any chapter, is by surrendering one’s property and leaving the home.
This is also true for any home equity line of credit that is established while declaring bankruptcy. The only way to discharge this debt is to pay it back according to the terms agreed to when signing the loan papers or to surrender the property.
This fact can work to the advantage of homeowners who are going through a bankruptcy. Banks are more willing to consider making a loan to someone with sufficient security to cover the amount of the loan and sufficient reason to ensure that it gets paid back on time.
A bankruptcy equity home loan can also provide the basis on which to begin rebuilding good credit when one emerges from bankruptcy. As long as the loan payments are made consistently and in a timely manner, this will be reported to credit reporting agencies as a positive mark on one’s credit report and will increase the credit score.
Even though obtaining credit while one is in bankruptcy is difficult at best, a bankruptcy equity home loan can be the step up that a person needs to get back on track and emerge from the bankruptcy in a better position than would have been thought possible. It can help to pay off creditors much more quickly than would otherwise be possible. A person may even be able to get smaller payments and get more than the allowed three to five years to make a full repayment. One must simply remember that this loan must be repaid regardless of what else gets done because it is a lien against real property that can and will be taken if the loan is defaulted on.