Bankruptcy Equity Home Loans Explained
There are a number of people who see bankruptcy as the only option for getting out of debt any time soon. Making this decision is very difficult. Repairing credit ratings after bankruptcy is also not easy. However, even though it is difficult, it is not impossible. An equity home loan is a certain kind of credit that is available when going through a bankruptcy. But you need to have some information about bankruptcy equity home loans before you try to get one.
Bankruptcy equity home loans can be used to discharge a chapter- bankruptcy ahead of schedule. The court system gives a person three to five years to discharge all their debts under chapter-. On special occasions, the debtor’s lawyer can submit a formal request to create an additional debt with the intention of eliminating the original debts more quickly and with a smaller amount of interest.
If this request is granted, the lawyer will then confer with financial institutions to locate a home equity 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.
It is important to understand that if you already have an outstanding home equity loan at the time of bankruptcy, you are dealing with 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.
This is also the case for any home equity loans received when the debtor is undergoing bankruptcy. 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. Financial institutions will be more likely to extend a loan to a debtor who owns property that can serve as proper collateral, and will give the debtor a good incentive to pay the money back.
Additionally, bankruptcy equity home loans would be a great way to start mending a damaged credit rating after going through bankruptcy. If you are careful about always submitting your payment on time, the financial institution will pass that information along to credit reporting companies who will then use it to make your credit rating rise.
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. The monthly installments will also be lower since the debtor will have more than the normal 36 to 60 months in which to repay the loan entirely. One must simply remember that this loan must be repaid regardless of what else gets done because it is a lien against real property that can and will be taken if the loan is defaulted on.
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