Bankruptcy can often seem to be the sole choice for a lot of people looking to eliminate their debt in a decent time frame. But deciding to declare bankruptcy is not simple. Repairing credit ratings after bankruptcy is also not easy. It's hard, but possible. Even a person who is in the middle to declaring bankruptcy can still qualify for an equity home loan. You need to be aware of some important information about bankruptcy equity home loans.
Such bankruptcy equity home loans are sometimes utilized to satisfy a chapter 13 kind of bankruptcy before term. You are given 3-5 years to discharge all debts filed under chapter 13. 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.
If this request is granted, the lawyer will then confer with financial institutions to locate a bankruptcy equity home loan that is agreeable to helping the debtor eliminate the debt in the time allowed, and can give a decent amount of cash to eliminate many of the original unsecured debts.
If one already has a home equity loan outstanding when filing bankruptcy, it is important to note that this is 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.
The same holds true for home equity loans obtained while covered under a bankruptcy proceeding. The only way to discharge this debt is to pay it back according to the terms agreed to when signing the loan papers or to surrender the property.
This is a fact that can come in very handy for a homeowner who is filing 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.
A bankruptcy equity home loan can also provide the basis on which to begin rebuilding good credit when one emerges from 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 can help to pay off creditors much more quickly than would otherwise be possible. 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. All a person has to remember when using this option is that if the loan goes into default for lack of payment, the home and / or property that was used to obtain the line of credit will be taken.