WHAT IN THE HELOC CAN I DO ABOUT THIS

H.E.L.O.C. or Heloc is an acronym for Home Equity Line Of Credit.  Many, many people took out these types of loans several years ago when real estate was booming and the inflated values created significant equity against which to borrow.  Many of those Heloc borrowers did not then, or perhaps do not still, realize that those loans are secured by their homes and are in effect, a second mortgage. 

That of course means that if the Heloc loan is not paid, the lender can foreclose on your house if they choose that remedy for default. There is less of an incentive for lenders to pursue that route as a method of first resort since real estate values have declined in more recent years. But the point is, they could, and in those instances where there is still a significant equity cushion, they very well might elect to do so.

Many Heloc loans featured a balloon payment after five years or seven years and so forth. The interesting feature on the economic landscape is that those are now coming due.  Certain experts in this field say that commencing now and continuing over the next three years, about five billion (billion with a “B”) dollars in outstanding Heloc debt will come due.

It is too early to tell what macro effect on the economy these loan maturities will have. It could significantly set back economic gains by diverting money that would have been spent and circulated on consumer goods into these other ends or by causing another round of foreclosures again depressing the just recovering real estate market.  On the other hand, it could spur a cycle of re-financing and lending that may contribute to the continued economic improvements.

In any event, at the personal level it doesn’t much matter.  If you have a Heloc balloon payment coming due and can’t pay it your first concern is probably not whether the bank’s actions against you help or hurt the national economy as a whole.

So, back to the title of this blog: What in the HELOC can I do about this? If your bank can’t or won’t modify the loan and you haven’t been able to refinance, you should consider filing a chapter 13 bankruptcy.  A Chapter 13 reorganization plan will allow you to do three very important things:

(1)    Keep your home;

(2)    Put an immediate halt to the collection actions against you; and,

(3)    Give you up to five years to pay off or refinance the balance of your Heloc debt.

The experienced attorneys and debt relief specialists at Pollak, Hicks & Alhejaj, P.C. can help you with this.  If you are in this situation, make it your priority to give them a call before the bank makes it their priority to take your home.

David G. Hicks

© 2014

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