Now that I’ve filed bankruptcy, can I stop paying my second mortgage (or heloc or home equity line of credit)?

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?