Bankruptcy Equity Home Loan Facts
Bankruptcy can often seem to be the sole choice for a lot of people looking to eliminate their debt in a decent time frame. This is never an easy decision to reach. Repairing credit ratings after bankruptcy is also not easy. However, even though it is difficult, it is not impossible. One type of credit that can be obtained even during a bankruptcy is an equity home loan. But you need to have some information about bankruptcy equity home loans before you try to get one.
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.
Once approved, the attorney can then negotiate with banks to find a bankruptcy equity home loan that has terms the person can pay off on time and will provide enough money to discharge a good share of the unsecured debts against this person.
It is important to understand that if you already have an outstanding home equity loan at the time of bankruptcy, you are dealing with a secured form of credit. 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. If you’re looking to eliminate such a loan you will have to repay it by following the rules you acknowledged at the time you obtained the loan or to turn over your house.
This fact can work to the advantage of homeowners who are going through a bankruptcy. A bank is much more willing to extend a line of credit to a person with enough security to cover what the loan will be for and also has a strong reason to want to pay it back according to the terms of the loan.
Additionally, bankruptcy equity home loans would be a great way to start mending a damaged credit rating after going through 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 is a way for a person to pay of creditors faster than could have otherwise been done. 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.
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