What is Cash-Out Refinancing, and is it a Bankruptcy Alternative?
If you own your home, cash-out refinancing is one of the bankruptcy alternatives you should consider.
Cash-out refinancing describes getting a new mortgage for more than enough to repay your existing mortgage, and using the difference to repay other debts.
For example, if you own a $100,000 house with a $50,000 mortgage, you could get a $75,000 mortgage. You would use the first $50,000 to repay your existing mortgage; the remaining $25,000 is the "cash-out" you get that you could then use to repay higher interest credt card debts. Obviously using the equity in your home is a good bankruptcy alternative, because in a personal bankruptcy with enough equity you may lose your house.
Of course cash-out refinancing is not for everyone. You must have equity in your house, and your new mortgage payment must be affordable. You should also beware of penalties to break your existing mortgage.
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