3 bankruptcy facts that may prove helpful

You may feel helpless in the battle against personal debt. The pressure is starting to impact your marriage, job and mental health. When you finally consult with someone in Minneapolis about relief, bankruptcy looks like your best option.

The bankruptcy process may appear scary, particularly if you have very little knowledge about it. Not understanding what may happen to your property, retirement funds and bank account is something that weighs on your mind. While not a comprehensive list, these three bankruptcy tidbits may aid in boosting your confidence in the process.

1. A home equity line needs paying off

You may have a first mortgage and a HELOC, or home equity line of credit, that burden your primary residence. While you can easily pay the mortgage, the HELOC is getting tougher as the interest increases. However, because this debt is not secured by your home, is it eligible for discharge under Chapter 7? Technically, bankruptcy can wipe out a HELOC. The tradeoff is that you lose the home. While the HELOC is not a secured debt, you must pay it if you wish to retain your house.

2. One spouse may file without the other

As a married couple, you may have separate credit cards and debts. One of you may find yourself underwater, while the other’s credit is relatively unscathed. In some circumstances, it may benefit the couple for the deeply indebted spouse to file for bankruptcy. Speak to your attorney about how this may impact the other, but it typically does not reflect on the non-filing spouse.

3. Refinancing a mortgage during Chapter 13

Chapter 13 bankruptcy establishes a payment plan to help get debts under control for a monthly amount that works. One thing that may add to your debt is your mortgage, and you may want to refinance it during bankruptcy. Under Chapter 13, it is difficult to do this; however, a loan modification is a possibility.

You likely have many more questions regarding bankruptcy. Check with your lawyer to get more insight into what chapter filing works best for you.

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