Choosing Between Bankruptcy or Debt Consolidation Loan?

Before filing for bankruptcy, consider debt consolidation loans that enable you to refinance credit card debt with a refinance mortgage or home equity loan.

BD Nationwide has helped countless homeowners avoid consumer credit counseling or bankruptcies simply by connecting them with mortgage lenders and counselors that offer solutions for consolidating revolving debt into a reduced rate loan that carries a fixed interest rate.

There Are Pros and Cons to both Debt Consolidation and Filing for Bankruptcy

Numerous consumers are grappling with substantial credit card debt and finding it challenging to meet the recently heightened payments. In the past, individuals facing financial strain with no apparent solution could resort to filing a Chapter 7 bankruptcy, thereby eliminating any unsecured loans. However, with the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, filing for bankruptcy is no longer the straightforward remedy it once was. Renowned bankruptcy specialist Michael H. Reed, a partner at the law firm Pepper Hamilton LLP in Philadelphia, clarifies, “Under the new amendments, the bankruptcy trustee, or any creditor, can move to dismiss a Chapter 7 filing if the debtor’s income is greater than the state median income.”

Given that bankruptcy may no longer be the optimal choice, a more favorable alternative is debt consolidation loans. If you possess equity in your home, this might be an opportune moment to leverage it and bring your credit card debt under control. A bad credit home equity line of credit can be employed to settle all credit card debt, offering lower payments compared to a credit card because of its extended amortization period. Opting for a fixed-rate mortgage ensures consistent monthly payments, providing a clearer picture for devising a plan to repay your debt. While a variable home equity line of credit (HELOC) is also a consolidation option, it’s advisable to compare interest rates. If your intention is to settle the line of credit promptly, it could be a sound decision; however, considering the rising rates, securing a fixed-rate second mortgage might prove more prudent.

Refinancing your existing mortgage is another avenue, allowing you to either cash out or reduce your mortgage payments. Opting for an adjustable-rate mortgage can yield short-term savings, particularly if you plan to sell before the rate becomes variable. Mortgage refinancing also provides an opportunity to extract equity in a lump sum and discharge your unsecured debt. – Article written By Rebecca O’Connor for BDNationwide