Line of credit: can bankruptcy eliminate (discharge) this type of debt?

Line of credit: can bankruptcy eliminate (discharge) this type of debt?

Lines of credit can be eliminated, or discharged, through a bankruptcy filing. Lines of credit are often unsecured and can be eliminated entirely through a bankruptcy. Unsecured lines of credit are like credit card debt–minus the plastic. Like credit card debt, unsecured lines of credit are common culprits causing consumer bankruptcy filings.

If a line of credit is secured, that debt may need to be repaid even if you file for bankruptcy. May is the operative word here, though. If a line of credit is secured, most commonly against a home (home equity line of credit/HELOC), that debt can still be eliminated through a bankruptcy. It depends on the value of your home, how much you owe on other mortgages and the type of bankruptcy filed.

With the explosion of home equity lines of credits (HELOC/second mortgages) in recent years past, this is a potentially vital factor in a bankruptcy evaluation, as well as a common cause of bankruptcy filings here in Sacramento.