Before considering bankruptcy there are several options you might want to pursue. The availability and usefulness of these options will depend on your employment (or income) situation and the type of assets you have. These other options involve consolidating your payments through a credit counseling service or consolidating all your debt through a debt consolidation loan.
There really are two types of debt consolidation loans, one that is secured by equity in your home and one that is not. (see New York Exemptions) With a debt consolidation loan that is not secured by your home a company simply loans you money to pay off your debt. You make one monthly payment to the consolidation company and they take care of the debt with your creditors.
You may also be able to lower your cost of credit and improve your financial circumstances by consolidating your debt through a second mortgage or a home equity line of credit. Think carefully before taking this on. These loans require your home as collateral. If you can’t make the payments-or if the payments are late-you could lose your home.
This option is especially important to consider if you have more equity in your home than you are allowed to protect with your New York home exemption. If you have more equity in your home than can be protected with your New York home exemption you will either have to surrender you home under a Chapter 7 bankruptcy or, if you want to keep your home, create a payment plan under a Chapter 13 bankruptcy. If you are considering a Chapter 13 bankruptcy to keep your home you might want to first pursue the debt consolidation option.
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