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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Is there anyone I can speak with regarding whether I should

Resolved Question:

Is there anyone I can speak with regarding whether I should file for bankruptcy (significant credit card debt) or pursue a debt consolidation loan? I am retired with fixed income and qualify for a Chpt 7 bankruptcy per an attorney. I am a legal resident of Michigan; pay a mortgage for a home in Michigan (value 'underwater) yet temporarily live in Ocala FL to help my mother who has Alzheimers. I pay $300 per month out of pocket for my mother to stay in assisted living facility in FL. I do not want to foreclose on Michigan home. Currently, my monthly income is $3290; my Florida monthly expenses with food/gas are $3100. My mother is too ill to take back with me to Michigan. Can you recommend someone I can speak with?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

In most cases, it is preferable to file a Bankrutpcy than to participate in a debt consolidation program. (Debt consolidation loans are only available for debtors who have assets - usually real estate - with equity that can be used as security for the loan.)

This is because both have a similar negative impact on one's credit report, and a Bankruptcy is far less costly. Additionally, in most cases, there will be at least one creditor who will not work with the debt consolidation program, so that there will be at least one debt that remains open after the debt consolidation program is finished.

Lastly, many debt consolidation companies are less than reputable, and it is not possible to know in advance if the company you are dealing with will provide an adequate service to you.


I think this is what you wanted to know. If not, please let me know.
Thank you.

Customer: replied 5 years ago.
The debt consolidation loan is with the bank that owns 2 of the 3 credit cards. My mortgage and home equity loan are also with the same bank. One option my bank suggested is to apply $6000 from my home equity loan (currently unused) towards the outstanding credit card balance. I am reluctant to charge anymore on my home equity loan because when and if I can sell my home later, the home price will be way above market. I am already underwater. I wanted to use the home equity credit line as my safety net if I go through bankruptcy for emergency repairs in my home (furnace, plumbing, etc). If I file bankruptcy, will my mortgage lender take away the $6000 unused credit line on the home equity loan?
Expert:  cfortunato replied 5 years ago.
Yes - if you file a Bankrutpcy, you can expect the mortgage lender to cancel the unused portion of your credit line.
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