As you may know, two types of debt classification exist: secured debt and unsecured debt. If you’re having debt problems and are considering filing for bankruptcy, you should know the difference between both types of debt, since bankruptcy affects each one differently. All bankruptcy cases are unique, but if you know the difference between your secured and unsecured debt, you’ll be able to predict what your finances will look like after the process is over.
Now, in addition to knowing the types of accumulated debt, you must deal with, there are other important questions that you’ll be asking yourself before and during the bankruptcy process, such as: “what kind of bankruptcy should I file”, “can bankruptcy stop a foreclosure on my home?”, “will filing for bankruptcy stop my creditors from harassing me?” If you want the answers to all of these questions, you should consult with a huntington beach bankruptcy attorney.
If you want to work with an experienced and committed bankruptcy attorney, consider KT Bankruptcy Lawyer as your first choice. This law firm’s bankruptcy attorneys will work tirelessly to help you get a fresh financial start. Their track record of success is impressive, which is why by working with KT Bankruptcy Layer you know that you are in good hands.
What are secured debts?
Secured debt is that which is secured by some type of tangible asset as collateral. Creditors do this to make sure they get their money back, even if you don’t pay them. In this type of debt, if you fall behind on your payments or simply can’t pay them, the creditor can reposition the asset. If this happens, the asset will be sold at auction to pay off the debt. Some examples of secured debt include:
- Car loans
- Real estate taxes
- Other property liens
What are unsecured debts?
In contrast, unsecured debt is a debt for which the creditor has no assets as collateral. Therefore, the creditor does not have the right to take your assets in case you are late in your payments or unable to pay them. Instead, the creditor would have to take legal actions to recover his money. Some examples of unsecured debt include:
- Personal loans
- Credit card debt
- Medical bills
What happens to each type in bankruptcy?
Both types of debt are affected by bankruptcy differently. In the case of secured debts, creditors are in a good position, since a bankruptcy discharge will not eliminate a lien on your property, it just eliminates your responsibility to pay the debt.
That means that, if you file for Chapter 7 bankruptcy, you will not have to pay your secured debt, but the creditor will be able to repossess the assets held as collateral. On the other hand, if you file a chapter 13 bankruptcy, and you have a sufficient monthly income, you can include the payment of your secured debts in your repayment plan, which can last from 3 to 5 years, depending on your accumulated debt.
On the other hand, for unsecured debts, things are different. Filing for bankruptcy will allow you to get rid of these types of debts without having to pay them in full (or at all).
In a successful Chapter 7 filing, the court will discharge your unsecured debts. As for Chapter 13, you will also have to include these debts in your payment plan (albeit with lower priority than secured debts), but you probably won’t have to pay them in full.
Have any questions? Talk to a bankruptcy attorney
If you are thinking about filing for bankruptcy and want to know more about how to differentiate your secured and unsecured debts, you should consult with a Huntington Beach bankruptcy attorney.
KT Bankruptcy Lawyer is considered by many of its clients to be one of the best bankruptcy law firms in California, making it an excellent choice when you are looking for help to get a fresh financial start. Contact them now for a free consultation.
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