Secured Vs. Unsecured Debt
Filing for bankruptcy is a huge decision, one that cannot be made lightly. There are many different factors to think through that will affect your present situation and your future. One of the most important factors to examine is all of your debts. You will need to determine if your debts are secured or unsecured, because these two types of debts are treated differently depending on whether you file Chapter 7 or Chapter 13 bankruptcy. What are secured vs. unsecured debts? Keep reading.
Secured debts are those that are attached to other pieces of property. For example, a car and a home are secured debts. If you default on these loans, these pieces of property can be taken from you. These are types of collateral that you can lose because you agreed to these loans, and if you cannot make the payments, or simply fail to do so, loan companies have the right to come after you and take back what you have not paid for.
Unsecured debts are not attached to any other property. For example, credit card debt, medical bills, and student loans are unsecured debts. While debtors can demand to be paid and can bring a lawsuit against you, they cannot take things away from you (i.e. they cannot take back your college degree or medical services).
Chapter 7 and Chapter 13 bankruptcy handle secured and unsecured debt differently. Chapter 7 is often attractive because it is relatively fast. Most unsecured debts will be discharged, and most secured debts will be “secure” as long as people continue to make payments for them. Chapter 13 bankruptcy often allow certain secured debts to be put into a pay-off plan. Mortgage arrears and car payments are the most common types of debt put into Chapter 13. This allows people to stave off foreclosure and re-possession by catching up on payments while being protected by bankruptcy’s automatic stay.
Both Chapter 7 and Chapter 13 bankruptcies have their advantages, but there are many factors that must be considered before choosing the right type of bankruptcy to file. If you are thinking about filing for bankruptcy, it is imperative that you speak with an experienced attorney who can review your entire financial situation. Contact Gingold & Gingold, LLC today.