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Bankruptcy Home Equity Loan Choices
By
Mike Hamel
Many who file
for bankruptcy use home equity in their
settlement arrangement. Bankruptcy does not
remove any liens on a home such as a
mortgage. But if there is more home equity
built up than is required to cover the loan,
it is an asset that can be tapped into for
needed cash in accordance with the rules of
the type of bankruptcy a person has filed.
Bankruptcy is a legal proceeding where a
debtor declares an inability to pay debts as
they become due. Since the Bankruptcy Abuse
Protection and Consumer Protection Act of
2005, personal bankruptcy filings for the
year ending June 30, 2006, fell 9.46 percent
to 1,453,008.
The two most popular bankruptcy options are:
Chapter 7 - Its purpose is to achieve a fair
distribution of the debtor’s available
non-exempt property. Unsecured debts not
reaffirmed are discharged, providing a fresh
financial start.
Chapter 13 - Available only to someone with
regular income whose debts do not exceed
specific amounts. It is used to budget
future earnings under a plan to pay
unsecured creditors.
In a chapter 7 bankruptcy, every state has
its own laws regarding the type and amount
of property a person can keep. Under chapter
13, a person does not have to surrender any
property.
“It’s important to have competent counsel
advise you,” says Ted Janger of The American
Bankruptcy Institute; “both about the
choices among chapters and about how best to
make sure that bankruptcy operates to solve
your financial difficulties, rather than
just as a hiatus.”
Bankruptcy negatively impacts your credit in
the short and medium term because it remains
as a black mark on your credit report for up
to ten years. However, some creditors offer
new loans to bankruptcy debtors because they
cannot file bankruptcy again for many years.
Conclusion
Are you one
of the many that suffer from insurmountable
debt and wonder if bankruptcy is an option?
Give us a call at (203) 924-6700 or
contact us.
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