Florida residents who are underwater in debt with their homes may have a few options. However, this situation is even worse for individuals who don’t owe a primary mortgage but who took out a home equity line of credit. If an individual does not pay off this line of credit, the lending institution can force a foreclosure on the property.
One way out of this debt is to file bankruptcy. Chapter 13 allows someone to pay back old mortgage payments throughout a three- or five-year period. In addition to the normal mortgage payment, the borrower also makes a payment to the court. By making two payments, a borrower is able to make a delinquent payment, as well as keep the balance current. Another strategy that an individual in this situation may use is to discuss the financial situation with a certified credit counselor. This individual can review the borrower’s budget, expenses and income. This process may help create extra money in the person’s budget so that more money can go toward these payments.
A different option is to ask for a loan modification. This option requires the lender to modify payments so that the existing household budget can be used to make the payment. Alternatively, a borrower may wish to consolidate a mortgage and a home equity loan into one long-term, fixed-rate mortgage. A final option may be to sell the property. Taking this course of action can greatly reduce monthly obligations for a family that is cash-strapped. In any situation, assets should not be transferred to another person’s name before filing bankruptcy as this is illegal.
Individuals who are behind on mortgage payments might benefit from contacting a bankruptcy attorney. Through a bankruptcy, individuals may be able to start fresh with or without the property.
Source: FOX Business, “Can’t Pay Off Home Equity Loan — File Bankruptcy?”, Justin Harelik, November 20, 2013