People who have paid off their homes might believe that they are not in danger of foreclosure. However, Wisconsin residents who have outstanding home equity loans might want to think again. Home equity lines of credit are secured by the properties to which they are attached, and the loans act as mortgages. If you default on those loans, the lenders are likely to foreclose. A bankruptcy adviser makes the following recommendations.
Whether or not homeowners will be able to keep their homes depends upon how much they owe as well as how long they have been in default. The first step could be to approach their lenders and ask for loan modifications. Some lenders might be willing to work with people in order to modify their payments to fit their household budgets. Those who cannot get modifications may have to sell their homes.
Another option is filing bankruptcy. Chapter 13 bankruptcy allows for the reorganization of debt, and those who file might be able to pay back delinquent mortgage payments over a three to five year period. They will make the normal payment to the lender along with a payment to the court. Payments to the court are intended to compensate the lender for the delinquent mortgage payments while the regular monthly payment will prevent the loan from becoming even further overdue.
Debt reorganization can be a viable alternative for people who have become delinquent in paying their house payments. Those who fall behind in paying their home equity loans might be able to save their homes by filing Chapter 13 bankruptcy.
Source: Fox Business, “Can’t pay off home equity loan — file bankruptcy?”, Justin Harelik, November 20, 2013