Many times, people pay down their debts by borrowing against the value of their home. But, provided you have kept current on your payments for your mortgage and other home-secured debts, bankruptcy may be a better way to go.
Borrow against your home and you tie up your equity in the home, often at a high-interest rate and correspondingly higher payments that you may not be able to make over the life of the loan. Once you fall behind on your home payments, the bank could foreclose on your home.
But as long as the equity in your home is close to the Utah exemption for a primary residence — $20,000 for a filing individual, $40,000 for a filing couple — and there is no equity available for the bankruptcy trustee, Chapter 7 bankruptcy might be preferable. The trustee would gain nothing by selling your home, while you would get debt relief from your unsecured obligations.
If you have a healthy dose of equity remaining in your home after the exemption, Chapter 7 will not be the way to go. In that case, consolidation of your debts