Can I erase home equity loans in bankruptcy?

You cannot completely get rid of home equity loans in bankruptcy, but you might be able to get a home equity loan reclassified as unsecured debt in Chapter 13 bankruptcy. You can only do this if your home equity loan is no longer secured by the equity in your home.

Home Equity Loans Not Secured by the Home

Your home equity loan is not secured by your home if the amount owing on your mortgage is greater than or equal to the current market value of your home. For example, if your home is worth $200,000, your mortgage is $225,000, and your home equity loan is $30,000, then your home equity loan is not secured by the home. 

Stripping a Home Equity Loan

If your home equity loan is no longer secured by your equity in your home, the bankruptcy court can "strip off" the loan and reclassify it as unsecured debt. In Chapter 13 bankruptcy, your unsecured debts are paid off through your Chapter 13 repayment plan. Most Chapter 13 bankruptcy filers only pay a portion of their unsecured debt through the plan; the rest is discharged at the end of the bankruptcy.

To learn more about stripping home equity loans from your home, see How to Strip a Second Mortgage or HELOC in Chapter 13.