It Might Be Time for a Chapter 13

One of the most common ways to pay off accumulated medical bills and credit card debt is to take a home equity line of credit, or HELOC, on your home. According to a recent CNBC article by Diana Olick, homeowners are sitting on trillions of dollars in cash.

How Is This Possible?

In the third quarter of 2017, the amount of equity homeowners reached was at an all-time high of $5.5 trillion. HELOCs and refinancing an original mortgage are the two most popular ways to tap into money from the equity in your home. From there, you could either pay off debt or pay for a large expense, like a renovation.  Interest rates are still historically low, and house values have continued to rise in the past few years. This has created equity that homeowners can tap into.

The article points out that borrowers deducted the interest on HELOCs on their federal income tax returns. However, the new tax bill eliminates this deduction. Borrowers used to be able to deduct interest paid on up to $100,000 in home equity loan debt. You can still deduct interest paid on a primary mortgage up to $750,000 worth of mortgage debt.

The new tax law also caps the deduction for property taxes at $10,000, which may cause housing prices to drop in some areas. In turn, homeowners may lose some of the equity in their homes.

What This Means for the Average Consumer

If you are not able to do a cash-out refinance where you get the lump sum equity out of your house all at one time, and if you cannot do a HELOC due to bad credit or lack of enough equity, you need to speak to a knowledgeable bankruptcy attorney about a Chapter 13 debt consolidation plan.

Chapter 13 is a way to protect the equity in your home from creditors and pay the debt. The attorneys at Bond & Botes offer a free consultation where you can talk with an experienced attorney who can take you through every step of the Chapter 13 process. Contact us today for more information.