It’s complicated.

Basically, you take your home value, subtract your mortgage and your homestead exemption, and if there’s any money left over, judicial liens stay attached to your home. If there’s no money left over, you can remove them or avoid them in a chapter 13 bankruptcy.

This will not be a complicated discussion of the lien avoidance. Here’s the code section we rely on in the Bankruptcy Code section 522(f) :

(f)(1)Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is

Sure, but only if you want to lose the home!

In most cases, bankruptcy wipes out your personal liability for debts, including secured debt like mortgages and car loans. However, those secured debts are still secured (attached) to your property. In other words, the mortgage is secured by your home. If you want to keep the home, you still need to pay the debt attached to it. Even if your personal liability is wiped out, they can still come after the property if you stop paying for it.

This morning, I started going through my morning email and saw the following question from a client in a chapter 13 case:

I do not make my monthly payments for my home equity anymore do I? is the home equity not included in the bankruptcy? How am I supposed to afford paying the monthly amount to the trustee, the home equity payment, mortgage, and utility bills?

It’s valid question. The horrible answer is that you have to pay for things if you want to keep them.

Home equity lines of credit (or HELOCS) are confusing to most people. Many clients think that these are not “real” mortgages and can be wiped out like a credit card. This is wrong. A heloc is a real 2nd mortgage. It is attached to your house, and if you want to keep the property, you have to pay the loans attached to it.

I discharged my second mortgage in a chapter 7 bankruptcy years ago. Now they are threatening to foreclose. Why?

Basically, if you are over, then you are a chapter 13.

Short answer: $42,000 if you are on title for the home and actually live in the home.

Long answer: watch the video.

No, you can file a motion to appear telephonically or even using Skype. But you’ll need a good reason and you’ll need a notary to be present with you when you call in.