Bankruptcy and Your Texas Home Equity Line of Credit (HELOC): What You Need to Know

What’s the Real Deal with Bankruptcy and Your HELOC in Texas?

If you’re juggling financial pressure and staring down a home equity line of credit (HELOC), you might be asking, “Can I keep my house if I file bankruptcy in Texas?” or “How is my HELOC treated in bankruptcy?”

These are incredibly common—and important—questions for homeowners in Texas. The good news? Texas law offers unique protections for home equity, even during bankruptcy. The not-so-good news? HELOCs are still secured debts, and that means the lender has rights too.

Let’s break it all down so you can understand exactly how bankruptcy affects your HELOC in Texas, what protections you might have, and why working with a specialized law firm like Kisch Consumer Law can be your best move toward financial clarity.

How Does Bankruptcy Affect a HELOC in Texas?

When you file for bankruptcy, your debts fall into different categories: secured and unsecured. A HELOC is a secured debt, tied to your home as collateral. That means if you default, the lender could eventually foreclose on your property.

But here’s where it gets more nuanced—especially in Texas:

Chapter 7 Bankruptcy and HELOCs

You can discharge personal liability for your HELOC, but the lien on your property remains.
If you’re behind on payments, the lender may still initiate foreclosure—even after bankruptcy.
Texas’s generous homestead exemption can protect your primary residence equity from liquidation, but not necessarily from foreclosure.

Chapter 13 Bankruptcy and HELOCs

Often a more strategic move for homeowners with equity lines.
You can catch up on HELOC arrears through a 3–5 year repayment plan.
You may even qualify for lien stripping, which can remove a second lien (like a HELOC) if your home’s value has dropped below the amount of the first mortgage.

Related Insight: For homeowners considering Chapter 13, understanding how lien stripping works in bankruptcy can open up serious financial breathing room.

Can You Strip a HELOC Lien in Texas Bankruptcy?

Short answer: Sometimes.

Lien stripping is a powerful bankruptcy tool that reclassifies junior liens (like a HELOC) as unsecured if your home is worth less than your primary mortgage. If successful, the lien can be removed, and the debt discharged at the end of your Chapter 13 case.

Requirements to Qualify:

You’re filing Chapter 13, not Chapter 7.
The value of your home is less than what you owe on the first mortgage.
The HELOC must be entirely underwater—no equity to support it.

Quick Tip: Get a professional appraisal before filing. Accurate home valuation is key to lien stripping success.

For a deeper legal breakdown, read this comprehensive explanation of lien stripping and junior mortgages in Chapter 13 bankruptcy from the American Bar Association. It offers legal context and case law that can help you understand your eligibility and strategic options.

What’s Protected Under Texas Homestead Exemption?

Texas is one of the most homeowner-friendly states when it comes to home equity protection in bankruptcy. The Texas homestead exemption allows you to protect:

Unlimited value of your primary residence (within acreage limits).
Up to 10 acres in a city or 100–200 acres in rural areas, depending on family size.

So, if you’re worried about losing your home over a HELOC in bankruptcy, remember: the law is likely on your side. But that doesn’t mean you should go it alone.

Q&A: Bankruptcy and HELOC in Texas

What’s the best way to protect my HELOC during bankruptcy?

Your best strategy often involves Chapter 13 bankruptcy, where you can repay arrears and possibly strip a second lien. Partnering with a law firm that understands both federal and Texas-specific protections is crucial.

Is my HELOC wiped out in bankruptcy?

Only the personal liability may be discharged under Chapter 7. The lien on the house remains. Under Chapter 13, you might be able to eliminate the lien through lien stripping if the equity conditions are right.

Can I keep my house if I file bankruptcy in Texas?

Yes, thanks to Texas’s generous homestead exemption—but you’ll still need to manage your mortgage and HELOC obligations or restructure them legally.

Why Choose Kisch Consumer Law for HELOC and Bankruptcy Help?

Based in Texas and focused on consumer bankruptcy law, Kisch Consumer Law understands how to leverage every legal tool available—including home equity protection and lien stripping strategies.

Here’s what sets them apart:

Texas-specific expertise in HELOC and bankruptcy cases.
Personalized legal advice that aligns with your financial goals.
Clear, client-friendly communication—so you’re never left guessing.
Proven track record in defending homes and restructuring debt.

Want a personalized, data-driven bankruptcy strategy?
Start here with Kisch Consumer Law’s interactive tools and explore what options match your unique situation.

FAQs About Bankruptcy and HELOCs in Texas

Q: Can I refinance my HELOC before filing bankruptcy?
A: It depends. Refinancing can complicate lien status and repayment terms. Talk to a bankruptcy attorney before making changes.

Q: Does filing bankruptcy stop HELOC foreclosure?
A: Yes—temporarily. Filing triggers an automatic stay, halting foreclosure proceedings. But long-term protection may require Chapter 13.

Q: Is my HELOC balance forgiven after bankruptcy?
A: Only if lien stripping applies. Otherwise, your personal obligation may be discharged, but the lien survives unless removed through Chapter 13.

Q: What if I already used my HELOC to pay other debts?
A: That could impact the court’s view of your financial planning. Full transparency with your attorney is essential.

Final Thoughts: So… Can Bankruptcy Be the “HELOC Hero” You Need?

Picture this: You’re sitting on your Texas porch, sipping sweet tea, not because you’re dodging collection calls—but because you figured out how to protect your home, ditch your HELOC debt, and reset your finances.

Sound dreamy? It’s doable—with the right legal strategy and expert guidance.

Whether you’re trying to strip a lien, protect your equity, or just get a straight answer to “Will I lose my house?”—you deserve clarity, not confusion.

Ready to make that dream a plan?
Visit Kisch Consumer Law today and learn more about creating a data-driven advertising strategy tailored to your audience and financial future.