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Should I Do a Rollback Mortgage or Get a Debt Consolidation Loan First? – Lisa

“Dear Steve,

I am trying to clear up my financial outlook. I owe approx $50,000 in credit card/unsecured loan debt. I own a home with a mortgage higher than the current value, including a 2nd. I was recently turned down a car loan from my credit union, due to my debt ratio. I am behind on none of my payments, nor have I been making late payments – making it just barely. My husband and I still have our full-time jobs, but other income we enjoyed from side jobs, etc… is no longer there. We have nothing in savings.

I just heard about a new “rollback” mortgage for people who owe more than their home is currently worth. I would also like to do a consolidation loan for the credit card/unsecured debt. Which should I attempt to do first?

I have never done a bankruptcy, and would rather to continue to struggle to pay my bills than to go that route. Any advice you could give would be immensely helpful.

Lisa”

Dear Lisa,

I hear what you are saying about the bankruptcy but consider this. A Chapter 13 bankruptcy will allow you to either strip the entire second mortgage or reduce the amount down to the current value of the home. Loan modification programs for mortgages have been wholly unhelpful to most people. They have resulted in increased payments, long delays and processing, or only temporary reductions.

With the amount of unsecured debt you have there isn’t a debt consolidation loan out there for you. The most I know exists now is $25,000 from LendingClub.com.

I think that before you make any move about what to do you MUST go and talk to a local bankruptcy attorney. Just find a local bankruptcy attorney and go in and talk about what bankruptcy really means for you.

If you are worried about it hurting your credit, I would suggest to you that you are only one unexpected event away from a financial disaster and bad credit now. Besides, rebuilding credit after bankruptcy is a simple process.

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Let’s also consider the facts, you are maxed out, your income has been reduced and you have no money in savings not the ability to save in your current situation. That is simply not a safe place for you to be.

Ultimately what you seem to be looking for is a way to repay your debts based on what you can afford and that protects you from creditors suing you or you losing the home. And all of that perfectly describes a Chapter 13 bankruptcy.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

morehelp1

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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