How to Discharge Equity Debt in Bankruptcy in Florida
Equity debt is a loan you finance using the equity in your home as collateral. Equity debt is secured debt that provides your lender with a lien on your property. Home equity loans, cash-out mortgage refinances and home equity lines of credit are all types of equity debt. If you fail to pay your equity loan, the lender has the right to foreclose on your property. By filing for bankruptcy, you may or may not be able to keep your home following the discharge of your equity debt.
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Things You'll Need
- Voluntary Petition
- Bankruptcy Schedule D
- Equity debt account information
Instructions
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Visit the bankruptcy office in your district. Florida has three bankruptcy districts -- the northern, middle and southern districts -- each of which have between two and four internal offices, or divisions, where you can formally file for bankruptcy.
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Complete a Voluntary Petition for bankruptcy to begin your bankruptcy proceedings and instigate an automatic stay on your debts. This will immediately halt any foreclosure or collection proceedings your lender may be taking against you.
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File Bankruptcy Schedule D along with your Voluntary Petition and other court-mandated documents. Include on the Schedule D your equity debt amount, your lien-holder, your account number and whether or not any portion of your equity debt is unsecured. You must also list any co-debtors involved with your equity debt as cosigners.
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Tips & Warnings
If you financed your equity debt in addition to a primary mortgage, but your home's market value has since fallen to a value less than the value of the mortgage and equity debt combined, you may be able to discharge some or all of the equity debt and remove the lien on your property.
Bankruptcy exemptions protect your personal possessions from liquidation during your bankruptcy case. Each state has varying bankruptcy exemptions, but Florida's exemptions are some of the most generous in the country. There is an unlimited homestead exemption, meaning that bankruptcy trustees will not sell a home for its equity in order to help satisfy a debt.
If you opt to file for chapter 13 bankruptcy instead of chapter 7, the court may restructure your equity debt into an installment plan that is affordable for you instead of simply discharging the debt altogether. This will allow you to remain in your home following the bankruptcy proceedings, while paying less each month for your equity loan.
Though bankruptcy may eliminate your obligation to pay an equity loan, it does not interfere with the rights of the lien holder. For instance, if a judge discharges your home equity loan in chapter 7 bankruptcy, you are under no obligation to continue paying your lender, but it does not stop the foreclosure process.
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