If you are considering bankruptcy you are in a unique position for seeking help with your debts. While bankruptcy is a great tool for managing different types of debt, there are important aspects of how each type of debt is handled that could influence the outcome of your case.
Types Of Debt
For some, the largest source of their debt comes from secured debts, like a mortgage or car loan. These debts are “secured” in terms of the asset being used as collateral on the loan in the event of default. Given the potential for asset seizure and liquidation, secured debts are often best handled in a Chapter 13 repayment case.
The most commonly held source of debt brought into a bankruptcy filing is unsecured debt. Common examples include utility bills, medical bills, credit card bills and other retail credit lines. As a whole, unsecured debts are the easiest to have discharged in a bankruptcy filing.
Tax debts, student loan debts, and domestic support debts are also considered unsecured, but are very difficult to include in your bankruptcy discharge. The reason is that these debts are also called “priority debts”, meaning they are of top priority for repayment in the eyes of the court. If you are deemed financially insolvent you may be able to have these debts included in a Chapter 13 plan or repaid through a liquidation proceeding, but it is very rare for a court to approve these debts to be erased without payment.
The sensitive nature of types of debt and how they are handled can make a lasting impact on your case. Therefore, consult a Cincinnati bankruptcy lawyer about your debt burden before filing your petition.