Home Equity Line of Credit maturing soon...I didn't reaffirm the debt...help needed.

[BrokeLoser]

My HELOC matures in September 2012...My Chapter 7 discharged in Sept 2011 and I didn't reaffirm with the lender (BofA)
Since the loan wasn't reaffirmed will they still ask for total payoff at the time of maturity (100k)? Or, will they deal with it in another way?
I won't have the cash to pay them off and I'm afraid I won't be able to refinance it with them or any other bank since I recently discharged.
I'm afraid they may foreclose since I still have plenty of equity in the home, definitely enough to satisfy the debt.
Will my first lender step in?

Any advice would be greatly appreciated.

[despritfreya]

If you have a balloon coming due and the debt was discharged, the lender may or may not contact you for payment. Since the lender is secured by your principal residence it can ask for the $$ in lieu of foreclosing (See 11 USC 524(j)). Will it? Don't know. If you fail to pay the balloon and fail to work out some deal with the lender, since there is equity in the property it may choose to foreclose. The 1st mortgage will not step in since it has no reason to. If the 2nd forecloses it must "take care of" the 1st.

Options:

1. Work it out with the lender to extend the balloon date or some other modification.

2. Refinance and payoff the 2nd (if there is enough equity maybe this is an option). You think you will be turned down but you won’t know unless you try.

3. File a Chapter 13 and force a 5 year repayment plan for the balloon on the lender - but to pay off $100k plus interest plus trustee fee over 60 months is probably too much to afford.

4. Sell the property to at least get as much equity out as you can.

I am sure others will chime in with ideas.

Des.

[BrokeLoser]

Thanks for the advice Des.
You're right, the chapter 13 route would be way to costly.
Boy, it's looking pretty grim...a mortgage broker friend of mine just told me he's pretty confident he won't be able to get me financed or refinanced.
I don't want to sell the house...it's my dream home, I've raised and continue to raise my kids here...they've never lived anywhere else.
I guess it may come down to one option and hopefully working something out with BofA.
Has anyone been in this exact position?

[Moneypenny]

I am in the same boat, I think. Only I didn't know about this "maturing." I thought my HELOC with BoA meant that at that date down the road (forget when-- it seemed so far ahead at the time) my line of credit would cease to be available. I didn't realize I was supposed to pay it all back on that day.

Are you sure that's how it works?

I am overseas for a while and unable to access my loan info, but I suppose they are all similar loans.

I was discharged ch7 2010, also in my home (no market value way below what I owe), and paying interest only on my HELOC 2nd. I thought I could just pay this indefinitely. Its only $120.

Am I wrong? And yes, what are we to do if the cash is due? It's certainly not worth paying it in my case since the house is about 130K underwater with HELOCS included.

[despritfreya]

I think OP, by operation of the terms of his loan, is already at the end of the HELOC term. I think HELOCs have an option of converting loans to conventional terms (mine does - but the option had to be exercised within the 1st 3 years) but that would be specific to the terms of your loan.

From your other post you were required to make interest only payments for a period of time. Once that time passes the principal becomes due and payable. Your bk did not change the terms of the loan. It only ended your legal obligation to repay. The fact that your ability to draw down on a line of credit has been cancelled has no impact on the terms of repaying what is already due unless there is a term in the contract that requires full payment of the balance if the line of credit is cancelled (I doubt there is suche a provision).

If you are trying to payoff the lien that survived your bk and want to make sure it is paid in full by the time of the balloon due date find an amortization schedule and try to plug in the info to figure out how much P & I you need to pay - it will not be exact but will be close enough so that the final payment is “manageable”. If the property simply is not worth what you owe between the 1st and 2nd other avenues such as trying to settle the 2nd or walking away may be in the cards.

Des.

[mrslick]

You will have another 10yrs to payoff the remaining balance.