THE DIFFERENT TYPES OF DEBT AND HOW THEY’RE TREATED IN BANKRUPTCY
Different types of debts are not treated equally in bankruptcy. Certain debts can be fully discharged when you file bankruptcy while others just can’t be discharged and must be repaid in full. We’ll review here the different types of debt and what to expect when you file bankruptcy.
Unsecured debts are not secured by collateral and are typically the easiest to eliminate through bankruptcy. The most common examples of unsecured debts are medical debts, personal loans, and credit card debts.
Secured debts are those secured by the collateral itself and are generally obligations that cannot be discharged through bankruptcy. Home loans are secured debt, because your home can be foreclosed upon if you do not pay. Car loans are secured debt because your car can be repossessed if you don’t pay. However, you can discharge your legal obligation to pay secured debt as long as you give up the property.
In a Chapter 7 bankruptcy, you’re allowed to eliminate unsecured debts which may free up money to satisfy the monthly obligations on the important things in your life like your house and car.
In a Chapter 13 bankruptcy, you’re allowed to repay past due secured debts and keep the property by staying current on your payments.
Certain debts are treated as priority debts by the Bankruptcy Code and are generally non-dischargeable. This means that even after you receive your bankruptcy discharge, you will still be responsible for any remaining balance due on priority debts. The most common are child support, spousal support, and taxes.
BANKRUPTCY LAWS ARE COMPLEX
They treat different types of debt in different ways. You need a skilled bankruptcy lawyer to correctly analyze your debt and provide a debt relief strategy that is going to have the best impact on your financial future!
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