20 Costly Mistakes to Avoid When Thinking About Filing for Bankruptcy

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MISTAKE #1: Taking out a second mortgage against your home, often called a home equity loan. You can't borrow your way out of debt. Many people hope to avoid bankruptcy by getting a home equity loan to pay off medical bills, credit card debt, and other obligations. And, not surprisingly, banks and other lenders make home equity loans sound attractive because they want to loan money. Later, people with home equity loans end up losing their home when they can no longer make the payments. If you're late paying medical bills or credit cards, the creditor can harass you, take a judgment, and potentially garnish your wages – and that's about all. When you're late paying a home equity loan, the bank can foreclose and throw you and your family out of the house. Don't trade unsecured debts for a home equity loan. The odds are good that if you file for bankruptcy, you will get rid of your debts and still be able to keep your home.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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