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San Diego Bankruptcy Blogs from May, 2010


Home Equity Lines of Credit (HELOC’s) are dischargeable in bankruptcy. There is a lot of different and confusing information out there about whether there is any personal liability for a HELOC or 2nd or 3rd Deed of Trust (commonly referred to as mortgages) when a homeowner defaults and the lender is forced to foreclose.

First of all, under the Mortgage Forgiveness Debt Relief Act of 2007, there may not be liability anyway if the property was the debtor’s primary residence and other time sensitive factors are met. However, even if the Mortgage Forgiveness Debt Relief Act of 2007 does not apply, personal liability related to Deeds of Trust can be discharged in bankruptcy.

Furthermore, 2nd and subsequent loans on a primary residence can be wiped out in a Chapter 13 bankruptcy where the current fair market value of the home is less than what the debtor owes on his 1st Deed of Trust. An experienced bankruptcy attorney can advise you properly and guide you to the best solution for your unique situation.

Most people keep all of their property when filing for bankruptcy. Unless you have an unusual amount of assets, you will likely be able to keep all of your property. First of all, many debtors are concerned they will lose their household goods and furnishings just because they filed for bankruptcy. This is simply not true. The laws provide for certain exemptions which allow debtors to protect their property. For example, regular household goods and furnishings are exempt in virtually unlimited amounts, so there is no need to worry that the trustee will sell your clothes or furniture. In addition, there are many other exemptions a debtor can use to protect virtually any kind of asset, up to a certain amount. Consult with an experienced bankruptcy attorney to assist you with proper exemption planning so you can keep your assets.

Retirement Accounts are Protected. Many people make the mistake of using their retirement funds to try and stay afloat. What most people don’t realize is that IRA, 401k and certain other retirement funds are exempt in very large amounts. There is no need to wait to file bankruptcy just because you have a large amount of retirement money. In fact, it often makes more sense to file sooner rather than later so you can keep your retirement funds. Only a qualified bankruptcy attorney can evaluate your situation and provide the proper strategy concerning the timing of your bankruptcy filing.

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