| Many consumers are finding themselves with heavy | | | | you'll know exactly what your payments are every |
| credit card debt and unable to make the newly | | | | month and hopefully be in better position to work out a |
| increased payments. In the past, struggling debtors | | | | plan to pay off your debt. A variable home equity line |
| behind in payments with no solution in sight could file a | | | | of credit (HELOC) may also be an option for |
| Chapter 7 bankruptcy and eliminate any unsecured | | | | consolidation, but compare interest rates. If you plan to |
| loan. With the Bankruptcy Abuse Prevention and | | | | pay off the line of credit quickly, it may be a good |
| Consumer Protection Act of 2005 now in effect, filing | | | | decision, but with rates rising, locking in a fixed-rate |
| a bankruptcy is not the easy answer it used to be. | | | | second mortgage may be the better answer. |
| Noted bankruptcy specialist Michael H. Reed, partner in | | | | Another option is to refinance your current mortgage |
| the law firm of Pepper Hamilton LLP in Philadelphia | | | | to either cash out or lower your mortgage payments. |
| explains, "Under the new amendments, the bankruptcy | | | | Refinancing to an adjustable-rate mortgage will save |
| trustee, or any creditor, can move to dismiss a | | | | you money in the short-term if you plan on selling |
| Chapter 7 filing if the debtor's income is greater than | | | | before your rate becomes variable. Mortgage |
| the state median income." | | | | refinancing can also be used to cash out your equity in |
| With bankruptcy often not the best option, the better | | | | a lump sum and pay off your unsecured debt. |
| solution is debt consolidation loans. If you have equity in | | | | Just be cautious in using your home as collateral. |
| your home, now may be the time to tap into it and get | | | | Remember, if you default on your loans you could lose |
| your credit card debt under control. A home equity | | | | it. A second mortgage can help free up cash flow, but |
| loan can be utilized to pay off all credit debt. The | | | | only if you curb your use of unsecured loans. Cut up |
| payments on this second mortgage will be much lower | | | | your credit cards as soon as you consolidate so that |
| than a credit card payment because it is amortized | | | | you won't be tempted to continue to spiral further into |
| over a longer period. If you get a fixed-rate mortgage, | | | | debt. |