Chapter 13 Bankruptcy Second Mortgage

chapter 13 bankruptcy second mortgage

Filing for bankruptcy is a tempting option for those wondering how to repay debt. You may have been promised that in return for certain measures (liquidation or a court ordered debt repayment plan) your debts will be considered paid, no matter how much you manage to actually repay. However, when planning how to repay debt, you must remember that bankruptcy is a very public affair and the resulting humiliation is very real. Second, it will take you some time (upwards of 10 years) to repair your credit record once your debts under bankruptcy are discharged.

Here are some tips on how to repay debt without going down the bankruptcy road.

Save More, Spend Less

This is the first piece of advice any debt counselor will give you. Don’t live beyond your means. Sounds easier than it can be done, but there are many expenses most of us can do without – locate them when figuring out how to repay debt. This can include defering non-essential purchases. Or taking a weekend trip to a nearby destination rather than flying for a long vacation to an exotic beach paradise. You can amaze yourself how much you can manage to pay back just by cutting back on some of the more luxurious expenses.

Look For A Second Income

You don’t have to necessarily moonlight as a janitor or dander, but it helps if you can find a second, part-time job. Online jobs are easy to find and there are plenty of jobs out there that you can do in your spare time for a decent income.

Put Your Savings And Investment To Work

You may need to dip into your savings to come up with money to make loan or credit card payments. You might even be able to secure a loan against your life insurance policy. See if your investments can be stalled in the short- to medium-term to provide you the funds you need to stay out of bankruptcy court.

Get A Second Mortgage

A second mortgage squeezes the equity from your current home. If possible, use a second mortgage to fully repay your debt. This is a good method for making the unutilized equity on your house work for you and you will typically find that the rates on a second mortgage, or a full refinance, are much lower than the rates charged on your unsecured debt. With the money you save, you should start an aggressive savings plan that will allow you to establish a solid foundation in the event of future financial emergencies.

Credit Negotiation

Approach your creditors to see if they are willing to lower interest rates and/or accept lesser payment to help you clear debts. They don’t refuse in most cases because they want to get back at least some of the original loan amount, which may not happen if you file under Chapter 7 or Chapter 13.

Debt Consolidation

Debt consolidation works if you have several debts to repay. You may need to approach a debt consolidation company for help in preparing a good plan to help you out of debt and to assist you in negotiating with your lenders. While consolidating all loans into one payable loan is a good idea, try not to take out another loan to pay this lump sum. If you have to opt for a debt consolidation loan, make sure the terms are favorable and don’t end up pushing you deeper into the debt trap.

There are many ways to avoid bankruptcy and its long-term downsides if you are willing to do the work.

Chris has more than 15 years of experience in the financial services industry, having helped thousands of clients fix their personal finances. He the author of Help Fix My Finances, the textbook that accompanies the Personal Finance Program of the same name. In the textbook, Chris stresses the importance of achieving a debt-free lifestyle and highlights the essentials of understanding your own After-Tax Cash Dilution Rate. He maintains a debt-free blog at HowToRepayDebt.com where you can obtain a free report on the basics of Bankruptcy.

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