Author Topic: HELOCs and Chapter 7  (Read 3864 times)

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deepkimchee

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Re: HELOCs and Chapter 7
« Reply #15 on: June 07, 2012 11:58:46 PM »
Maybe a 13 as oppossed to a 7 isn't a bad idea if you have no or little equity.

I used to laugh at the old timers thinking of, "cash only",  yes, they were on to something.  I have adopted that way of thinking myself.
I refuse to let a piece of paper intimidate me

My statements are educated/non-educated guesses, not legal advice

despritfreya

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Re: HELOCs and Chapter 7
« Reply #16 on: June 08, 2012 01:49:58 AM »
This whole discussion fails to take into account the rights afforded the homeowner by homestead exemptions, which, in some states, can be very generous.The BK courts must, by law, abide by the state-offered relief.

Here is where there is a misunderstanding in many consumers' minds.  Exemptions, such as a homestead, do not protect you from a consensual lien, inside or outside of bk as it relates to real estate.  If it did, no one would pay their mortgage.  Worse yet, if it did, no lender would lend for the purchase, refi or home equity loans.  Bottom line is that if the loan is not paid the lender has the right to foreclose.  It may choose not to, but it does have the right.

Des.

CleaningUp

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Re: HELOCs and Chapter 7
« Reply #17 on: June 08, 2012 01:59:57 AM »
Excuse me for raining on your parade...

In my state homestead exemptions apply, by statute, only to "first and second" mortgages.

If someone is stupid enough to give one a HELOC on top of second, they are out of luck.


despritfreya

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Re: HELOCs and Chapter 7
« Reply #18 on: June 08, 2012 02:02:02 AM »
So, based on your comment related to stripping off the 2nd through a Chapter 13, is the "unsecured" based on the fact there is no equity to use as collateral? If so, does the 13 also prevent the lender from coming after the debt when and if there is equity?

The answer is "yes" to both questions.  In the 13 you will have a Court Order or Judgment that determines the value of the property at that time.  The Order/Judgment will strip away the junior lien because the value does not exceed the amount owed on the senior lien, not even by 1 cent.  Upon completion of the Plan and entry of the discharge, the Order/Judgment can be recorded for the purpose of releasing the lien.  The advantage is that you have finality to the issue (assuming you complete the Plan) and appreciation in the value of the property once the Order/Judgment is entered is not relevant.  The lender does not get a second bite at the apple.

The disadvantage to the 13 is that you are committing yourself to at least a 36 month bk and maybe even longer, up to 60 months.  For many this simply is not worth it but the system does work for those willing to stick it out.

Des.

despritfreya

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Re: HELOCs and Chapter 7
« Reply #19 on: June 08, 2012 02:03:15 AM »
In my state homestead exemptions apply, by statute, only to "first and second" mortgages.

Can you direct me to the statute?  This is very interesting.

_____________________________

Edit to add and make a request - If you can't give me the actual statute, then maybe indicate which state you are in - I can then find the statute. . .

While certainly I have not read every homestead statute in the US, I am quite perplexed that any Statute would protect a homeowner from a consensual lien, regardless of its rank in order of recording. 

Interestingly a colleague of mine apparently put on a seminar dealing with homestead laws.  I found the below snippet.  I do not know when it was written but can tell you that the law firmís name changed several times over the past 6 or 7 years and Mr. Hebert left about 2 years ago:

http://www.ashrlaw.com/dox/homestead.pdf

Quote
Every state that allows a homestead exemption excludes certain debts from its protective provisions. Whether by statute or by case law, every state recognizing a homestead exemption does not protect the debtor from consensual liens, mechanicís liens on homestead property, or real property taxes. Many states also carve out of the homestead exemption child support and/or spousal maintenance obligations. Beyond these fairly uniform exceptions, there is quite a divergence. For instance, Minnesota excepts from the protection of its homestead exemption certain health care liens. Several states exempt out-of-state taxes.22 Alabama only protects the debtor from contract claims, and Mississippiís statute offers no protection from bail bond liability. Tennessee, the state with the most unique carve-outs, exempts a number of very specific debts, including fines for voting outside oneís precinct, carrying a concealed weapon, and selling liquor on election day.

Des.
« Last Edit: June 08, 2012 02:52:34 AM by despritfreya »

deepkimchee

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Re: HELOCs and Chapter 7
« Reply #20 on: June 08, 2012 06:36:12 PM »
One of the many controversial reasons I chose a default judgment, over a stipulated judgment was the consensual lien factor.
I refuse to let a piece of paper intimidate me

My statements are educated/non-educated guesses, not legal advice

Ship came in then sank

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Re: HELOCs and Chapter 7
« Reply #21 on: June 08, 2012 09:48:47 PM »
All very interesting and enlightening comments. Hopefully it won't come to filing, but if necessary at least I have some knowledge of my options. Thanks everyone!