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is a home equity loan considered unsecured debt?

1 Answers. Asked on Nov 07th, 2012 on Bankruptcy - Massachusetts
More details to this question:
will my credit card debt and home equity loan be wiped out?
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Answered on Nov 07th, 2012 at 3:20 PM

A home equity loan is typically secured by the property on which the loan is made.  There may be insufficient equity in the property above the home equity loan so that it may in reality be unsecured, but the lien still remains against the property.  This means that they still have the ability to foreclose if payments are not made pursuant to contract, but they would take ownership of the property subject to what is owed to any senior mortgages (usually the first mortgage).

In a Chapter 7 bankruptcy case, your discharge will eliminate the obligation to pay on the loan so that if the property is foreclosed on, you will not owe anything further.

In a Chapter 13 bankruptcy case, you may be able to additionally remove the lien altogether (this is known as "lien stripping").  Whether you can do this or not depends on the value of the property, the amounts owed to all mortgages and liens and whether it is your principal residence or not.

You should consult with an experienced bankruptcy attorney in your area for more specifics.

Mark Markus has been practicing exclusively bankruptcy law in California since 1991.  He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization,  AV-Rated by, and A+ rated by the Better Business Bureau.  CONTACT MARK for more information or to schedule an appointment.   

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