Debt Matters: Understanding The Two Types Of Bankruptcy Debt


When the time comes to declare bankruptcy, it helps to understand how your debt is treated. Most people understand the gravity of a chapter 7 bankruptcy filing and want to get the most they can from it. The debt you hold and that goes onto your bankruptcy paperwork can be divided into two separate types, and it's important that filers know the differences before they file. Read on to learn more.

Unsecured Debt

Most people who file for chapter 7 have plenty of credit card debt, and that is exactly what is known as unsecured debt. Having unsecured debt is a good thing, since it means that you won't be losing any property that might be connected to the debt. When you applied for your credit card account, you were likely asked several questions about your income and other debts, but you would not have had to mention any other property that you owned. That is because unsecured debt and your ability to get it is not based on property, but on other standards.

When you declare bankruptcy, be sure you list each and every credit card, payday loan, personal loan, and line of credit because any unlisted debts might remain after your bankruptcy is final. You will, of course, have to give up those cards, but there is a chance you can get more credit after your bankruptcy is over. It's important that you keep in mind that the use of unsecured debt in the time period leading up to the filing is strictly regulated. You can use the cards for anything that is needed, but you cannot abuse the system by being frivolous with your spending.

Secured Debt

As you might guess, secured debt does have property securing it. The most common forms of secured debt are mortgages and auto loans. The home and the car itself are the property that secures the loan, and if you fail to make payments, then you might face foreclosure or repossession. Secured debt cannot be listed on a bankruptcy filing, but you might buy some time for paying.

If you are being threatened with foreclosure or a repossession, you might get a temporary freeze on those collection activities once you file. Eventually, the stay will be lifted, and efforts to collect will begin again after a few months. You should keep in mind that you will not need to make any credit card payments once you file, and those funds might be enough to keep you in your home.

This issue of debt and property during a bankruptcy can be complex, so speak with an office that offers bankruptcy attorney services to learn more.


20 August 2018

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