How is HELOC treated in Chapter 7 Bankruptcy?
November 24, 2010 By Greater Boston Law By: MA Bankruptcy Attorneys A Chapter 7 bankruptcy filing requires liquidation of unsecured assets to pay creditors. However, the law allows the Debtor to keep different categories of property up to certain values. As a result, the vast majority of Debtors who file Chapter 7 are allowed to keep all their property. After your Chapter 7 filing, you receive a discharge from all of your debt. As a result, your personal liability to pay back your HELOC is discharged. Because your HELOC is a secured debt (secured by a mortgage against your home), filing a Chapter 7 does not affect your right to continue to pay the HELOC and keep your home. The bank retains its right to foreclose against your home if you fail to make the monthly HELOC payments. However, the Chapter 7 discharge prevents the bank from requiring you to pay any deficiency after a foreclosure. This is important since you may decide to surrender your home as part of your Chapter 7 filing, if
