Many consumers are finding themselves with heavy credit card debt and unable to make the newly increased payments. In the past, struggling debtors behind in payments with no solution in sight could file a Chapter 7 bankruptcy and eliminate any unsecured loan. With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 now in effect, filing a bankruptcy is not the easy answer it used to be. Noted bankruptcy specialist Michael H. Reed, partner in the law firm of Pepper Hamilton LLP in Philadelphia explains, "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."

With bankruptcy often not the best option, the better solution is debt consolidation loans. If you have equity in your home, now may be the time to tap into it and get your credit card debt under control. A home equity loan can be utilized to pay off all credit debt. The payments on this second mortgage will be much lower than a credit card payment because it is amortized over a longer period. If you get a fixed-rate mortgage, you’ll know exactly what your payments are every month and hopefully be in better position to work out a plan to pay off your debt. A variable home equity line of credit (HELOC) may also be an option for consolidation, but compare interest rates. If you plan to pay off the line of credit quickly, it may be a good decision, but with rates rising, locking in a fixed-rate second mortgage may be the better answer.

Another option is to refinance your current mortgage to either cash out or lower your mortgage payments. Refinancing to an adjustable-rate mortgage will save you money in the short-term if you plan on selling before your rate becomes variable. Mortgage refinancing can also be used to cash out your equity in a lump sum and pay off your unsecured debt.

Just be cautious in using your home as collateral. Remember, if you default on your loans you could lose it. A second mortgage can help free up cash flow, but only if you curb your use of unsecured loans. Cut up your credit cards as soon as you consolidate so that you won’t be tempted to continue to spiral further into debt.

Rebecca is a respected writer and article contributor to the Desert Magazine and Los Angeles Times. Please visit these additional resource websites: To get a free loan quote for a home equity consolidation loans for people with all types of credit, please check out the special loan offers for lower payments. If you need more loan advice about credit lines, take a look at the flexible programs offered for second mortgage loans with bad credit.

For the latest interest rates for fixed rate mortgages and interest only credit lines, please visit the online resources at Second Mortgage & Equity Loans Nationwide.

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