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Should You File Bankruptcy? Part 4 of 5: Consider Your Liabilities – What Do You Owe?

2009 Debt - indian ink on watercolor paper
With easy financing over the past several years, many people have fallen into the trap of “buying now, paying later.” Unfortunately, the value of the assets we purchase with credit rarely hold their value – and may end up costing us hundreds or even thousands of dollars more than the original purchase price.
 
Like assets, liabilities come in many forms. Oftentimes if we own, we also may owe. Many people owe on their home mortgage, a car loan, credit cards, and other types of loans. However, don’t think of all debt as being bad. For example, by paying your mortgage, you could be getting closer to owning your home outright and you are developing additional equity along the way.
 
Types of Debt
 
There are primarily two types of debt. These include secured debt and unsecured debt. Secured debts are those that are tied to something of value that you are making payments on. For instance, your car payment is secured by your car, and your mortgage payment is tied to your home. If you were to stop making payments on these secured debts, the creditors may repossess those items and take them away from you. The creditor is then legally able to sell these assets in order to recoup some of their losses.
 
Unsecured debt is not tied to any particular tangible item of value. Some examples of unsecured debt include student loans, credit card bills, and past due utility bills. Because unsecured debt does not involve tangible items that can be repossessed, these types of debt may be considered lower priority than secured debt.
 
How Much Debt Do You Have?
 
Some common liabilities that people have can include those in the following list. In order to help you in determining how much total debt you have, write an approximate amount that you owe on each of the liabilities that pertain to your personal situation.
 
Mortgage _____
Second Mortgage / Home Equity Loan _____
Auto Loan(s) _____
Credit Card Balance(s) _____
Gas Credit Card Balance(s) _____
Department Store Card Balance(s) _____
Personal Loan(s) _____
Student Loan(s) _____
Past Due Bills _____
Other _____
 
Listing all of your debts is important in determining where you stand financially overall. This is because if you owe more than you own, then you will need to make some drastic corrections before moving forward in getting back on your feet financially.

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