Judgment of HELOC

[4bkstuff]

THe credit Union that we had our HELOC with recently won a judgment against us for the full amount of the HELOC. Does this mean there is no lien on the house anymore from them? Our first is with BoA and we are underwated by at least 40k just on the first mortgage.

I am wondering if there is really a reason for us file Ch13 if we decide to surrender the house and let it foreclose. The HELOC is most of our debt (we also have 2 credit cards that are not paying on in the amount of about 7K). One car is almost paid off and the other we bought in the last year and are current. Do you think it would be smarter for us to try and negotiate a settlement with the Credit Union on the Heloc and not file? Thanks for any insight.

[lrprn]

The one problem with trying to negotiate this yourselves is that the credit union has no reason to negotiate with you. They've already successfully gotten a judgment against you for the full HELOC amount. They will make money on your second mortgage now whether you surrender the property or not. Worse, surrendering the property now leaves you owing on both mortgages - the second in the amount of the judgment and you still will owe whatever amount is left on the first mortgage after it sells at auction. Most houses are sold back for pennies on the dollar. Filing Ch 13 deals with both the judgment and your first mortgage as well. Surrending the home inside a Ch 13 plan provides a much improved opportunity to deal effectively with both.

One potential issue you may have filing Ch 13 is that one of your cars is paid off and the other nearly is. Your state's exemptions may not protect all of their current market value. Still, even if that turns out to be the case, you'll owe the trustee far, far less to keep both cars than the total of your two mortgages.

If you haven't already, set up 3-4 free initial appointments with experienced bk lawyers who frequently file Ch 13 cases. Lay out all your financial dealings and ask if it makes sense in your financial situation to file Ch 13. From the limited information you've shared, there seem to be advantages to file Ch 13. However, you need expert legal advice to confirm that.