HELOC to purchase business, business now closed.

[amyinflorida]

I am looking for some insight. I borrowed 45K on a heloc to purchase a business. Now do to the economy I am closing my business. The business always paid for the loan payment prior to its closing. I am hoping to settle with GMAC on this debt for aprox. 10% of the balance.

August will be the first month that the payment or any payment has gone late. I am am saving, selling and doing whatever I have to, so I can save 5K in 6 months to offer them a settlement.
Since my first is going to be current, is it less likely the will settle because we want to keep the house. Also the house was purchased in 05' and we are approx. 100K upside down, $80 not including the heloc.

Is it a good possibility that they will garnish or wages etc.? Any info regarding a settlement in this situation would be very helpful.

Thank you in advance,
Amy

[flagirl4444]

You should consult a tax specialist before settling on that debt. If you settle for less than you owe the bank will send you a 1099 for the amount forgiven, at which point it may be considered taxable income. Since the heloc was not used for home improvements or to purchase the house, it probably won't qualify for the mortgage debt relief act.