Ch 13 and Home Equity lines of Credit

[vleisme]

We filed ch 13 on November 1st and our 341 is on Dec. 6th. In Oct., our atty. said we could sell one of our 2 vehicles and use the money to pay towards our interest only HELOC. This vehicle was paid off over a year ago with money from the HELOC and since we had equity in the vehicle, we would've had to pay a much higher payment in the plan if we kept the car. My question is, after we start paying on the plan, what if we need emergency money can we take money out of the HELOC and if we did how would the trustee know? I am really worried about how we are going to make it the next 40 months with NO money for emergencies since the budget on the plan is so tight.

[woeisme]

From what my lawyer has told me, for the duration of my CH 13 I can't access any credit, which would include a home equity loan, without approval of the trustee first. I'm also not supposed to incurr any new debt, with exception of true emergency like a medical bill. I would see how much of that car equity you can keep as cash covered by your exemptions. You might want to keep some of it on hand, if you can, as your emergency reserve as opposed to paying it all into your HELOC.

[vleisme]

Thanks for the info woeisme. I got my answer to this question today when I got home there was a letter from my atty. that the credit union holding the HELOC and my 1st mortgage sent. The letter said all accounts including the HELOC are frozen and closed when we filed BK. I don't have to worry about accessing that money now it is gone! We could not keep any of the money from the car sales at all the atty said we could only pay towards a secured loan or give it over to the trustee to pay the plan.This is going to be a VERY long 40 months I hope we can survive it and come through in one piece!

[woeisme]

Sorry to hear that you can't keep any of the equity in the car, that really stinks, I would have thought that at least some of it would have been covered by your vehicle exemption, you might want to press your lawyer on this point again just to make sure he isn't missing something that could help you out. I know in Ohio our cehicle exemptions are pretty pathetic, just $1000 per vehicle, but I would think that if I sold my car I would be able to keep the $1000 and use it towards another car or something else...

Keep your chin up and while I'm sure it will be a tough 40 months (I have 57 more to go in mine!) you just have to try your best and pray for the best. Once everything is confirmed, is there any type of work that you can do on the side for a little extra cash and wiggle room each month? Overtime at your job, babysitting, handyman work, etc could all help keep it from being so tight and maybe allow you to slowly build up a little contingency fund in case something happens along the way. Good luck!