Please Don't Holler At Me......

[fsugirl]

I haven't posted anything for a while but I have a question....We have a mortgage that is 6 months old through Countrywide and we also have several credit cards that we got post BK but the interest will start kicking in January..We also have a car loan through Capital One Auto and we are paying 12.75 % interest..I was contacted by Countrywide and they asked if we wanted to do a Home equity line of credit and pay off our 2nd mortgage and roll everything we owe into 1 monthly payment..They said the interest would be lower on the home equity line of credit then our 2nd mortgage and it is interest only for the first 10 years..Would this be a good thing to do or not ?? I have never had a home equity line of credit so I am not sure if this is a good approach or not..Please don't give me a lecture about how we shouldn't have credit card balances because I know this. I just need an honest answer with no one hollaring at me...THANKS !!

[FilingOnMyOwn]

Suze Orman would say no to this...

BUT

Since you already filed bk once, recently, you probably should. The reason some would say not to do so, is because unsecured debt is dischargeable should you need to file chapter 7, but secured debt (the house) is not, so you still have to pay. But since you already filed bankruptcy once, and can't file again for another 6-7 years, you still have to pay everything either way. So yes, you should probably do it... But don't make the mistake of paying everything off with your home and charging everything back up again. Then you would really screw yourself, big time.

[HHM]

I have to holler a little bit, what you doing post BK with credit card debt that you can't pay off.

As for the rest, absolutely not, you will end up paying more in interest over the long run than if you just left every thing as is. There is more to a loan than interest rate. Especially if its interest only for the first 10 years. Home Equity loans compound interest like credit cards, not like regular loans, so even if the interest rate is relatively low, you pay more in interest vs a standard fixed rate second mortgage.

If I were you, get on a plan to PAY OFF your credit cards ASAP and STOP using them. Take all your excess cash (cut expenses where possible) and devote those to paying your credit cards. Then focus on your car. Once your credit cards are paid off, use the money you were paying to your credit cards to over pay your car payment to pay down principal. After the car is paid off, focus on the 2nd mortgage, take the car payment, and devote it to overpaying your 2nd mortgage to pay down principal.

ReFi's NEVER save you money in the long run when you refi loans that are less than five years old, sure you get a lower interest rate, but if you actually calculate the "true" cost of the new loan, you always end up paying more than if you left things as is.

Instead of using credit to get out of credit (that's why most people are in BK), adjust your lifestyle and make sacrifices, you really don't want to go bankrupt again.

[SinkingFast]

We had a HELOC with CW, much like what you're describing FSUGirl. We were only required to pay the interest each month. We could pay additional that would be applied to the principal if we wanted.

When the HELOC first began, it was with some sort of teaser rate. Being good citizens, we paid our full payments and then some. The first year, we actually made some headway on the principal balance. But life comes along and you know how it goes. Next thing you know, all we could afford to pay was the interest only payments.

FOUR years later, when we cashed out Hubby's Retirement IRA to pay off the HELOC in preparation for selling the house, we owed about $800 less than we originally borrowed. Money we'd paid toward the principal back in the first year of the loan.

Now stop and think about it from a BK perspective. You're thinking about converting unsecured debt into secured debt. Paying off CC's with what's probably an inflated value of your home. Should you get in a pinch and NEED to sell, you can't. The house won't bring what you need to pay off the Mortgages and pay your costs to sell.

Not such a good idea, is it??!!

[rrockinggramma]

If you find yourself starting to struggle again, your other option is a chapter 13. You could roll your debt into that and stop the interest from acrueing (sp?) again etc. If you are comfortable with the payments then just continue but quit using everything until you can get it paid down. Course filing a 13 on top of a 7 will not help your credit score at all but it will keep you out of digging a huge hole again and also keep you from pyramiding your debt. Good luck! (I am a 7 followed by a 13 and my credit sucks big time but I am finally figuring out how to live on what I make and not on what I think I should be making lolol.)

[tinroofrusted]

I haven't posted anything for a while but I have a question....We have a mortgage that is 6 months old through Countrywide and we also have several credit cards that we got post BK but the interest will start kicking in January..We also have a car loan through Capital One Auto and we are paying 12.75 % interest..I was contacted by Countrywide and they asked if we wanted to do a Home equity line of credit and pay off our 2nd mortgage and roll everything we owe into 1 monthly payment..They said the interest would be lower on the home equity line of credit then our 2nd mortgage and it is interest only for the first 10 years..Would this be a good thing to do or not ?? I have never had a home equity line of credit so I am not sure if this is a good approach or not..Please don't give me a lecture about how we shouldn't have credit card balances because I know this. I just need an honest answer with no one hollaring at me...THANKS !!

I won't holler, but do yourself a favor, and cut those cards up today!

And if you have to, work a couple of jobs and pay them off. don't add another lien against your house. Home values are going down right now, and the last thing you want is to owe more than the home is worth when and if you go to sell it!

[BassBoy]

As some have mentioned, and myself personally, I wouldn't want to turn unsecured debt into secured debt. My wife and I did this and eventually, it came back to haunt us. Everything was great for the first six months or so, but when I had to have elbow surgery and missed a month of work (only received a portion of my full pay) is when things went downhill. It's these unexpected surprises that can hurt you.

[BK'd-Betty]

Don't do it! IT'S THE BEGINNING OF THE END!

Been there, done that, glad it's over!

The scenario you describe is EXACTLY what led me to a SECOND Chapter 7!!!!!!

The housing market is expected to decline through 2010.

I know exactly how you feel right now, it's tempting, but interest only loans are responsible for so much financial turmoil in our society today.

SAVE YOUR HOUSE, don't make unsecured debt-secured.

I hope I don't sound like I'm lecturing, I'm not - I've just been there and know exactly what is going to happen. Pay special attention to HHM and SinkingFast's messages - I won't repeat what they've already said. It's sound advice. Especially what SinkingFast said about the INFLATED value that CW will give just to loan you money!!!

RUN away from this deal AS FAST AS YOU CAN!