Home equity loans are generally referred to as second mortgages. If you are struggling to make payments on a second mortgage, it may be possible to file bankruptcy in an effort to have the debt discharged. Let’s take a look at the process of filing for protection from creditors in Tennessee.
What type of bankruptcy protection should you seek?
In a Chapter 7 case, nonexempt property is sold in an effort to raise money to pay off your creditors. Although you may be required to sell your home as part of the proceeding, state law may exempt a portion of the equity that you have accrued in that asset.
In a Chapter 13 proceeding, you agree to make payments to creditors over a period of three or five years. You can retain ownership of your house by agreeing to stay current on both of your home loan payments.
You’ll want to hire an attorney
While you’re allowed to file for bankruptcy on your own, it may be in your best interest to do so with the help of an attorney. A legal professional who is familiar with Tennessee bankruptcy law may ensure that you don’t make any mistakes that could lead to your case being thrown out. If a case is thrown out, it could jeopardize your ability to file for Chapter 7 or 13 protection in the future.
You can choose to sell the home
Assuming that there is enough equity in the house to pay off both of your loan balances, it may be a good idea to sell your home. This allows you to satisfy your debt without hurting your credit score or potential to obtain a mortgage in the future.
Filing for bankruptcy may be an effective way to get out of debt in a timely manner. Although it may have negative consequences for your credit score, bankruptcy may allow you to satisfy existing balances without losing a home, car or other property.