Can a HELOC be discharged in bankruptcy?
Whether a home equity line of credit (HELOC) can be discharged in bankruptcy depends on whether you file for Chapter 7 or Chapter 13.
If you want to keep your home in Chapter 7 bankruptcy, you'll have to remain current on any mortgages or loans secured by your home, including HELOCs.
If you don't keep your home, any remaining loan balances after your home goes through foreclosure can be discharged in Chapter 7 bankruptcy.
In Chapter 13 bankruptcy, if your HELOC is no longer secured by the equity in your home, the court may "strip off" the HELOC and reclassify it as unsecured property. You then pay this unsecured amount through your Chapter 13 repayment plan. Most Chapter 13 debtors don't have to repay the full amount of their unsecured debt; anything remaining at the end off the repayment period is discharged.
To learn more about stripping off a HELOC in Chapter 13, see How to Strip a Second Mortgage or HELOC in Chapter 13.
by: Kathleen Michon, J.D.