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Different Debts In Bankruptcy

Different Debts In Bankruptcy

: Richard West Law Office

differencesThere are two main categories debts fall into; secured and unsecured. When filing for bankruptcy in Cincinnati it is important to know how these two types of debt are handled in a Chapter 7 or a Chapter 13 case. Here are some of theĀ  basic facts about these two types of debt:

Unsecured Debt

Most common ones are credit card bills, medical bills, retail lines of credit, and utility bills.

Debt is not tied to any asset as collateral, leaving creditor with less seizure or liquidation rights in the event of default.

The easiest to have discharged in bankruptcy; unless considered a priority debt.

Domestic support payments, criminal restitution, student loans and tax debts are considered priority debts.

If not considered a priority debt, can often be resolved with minimal payment or liquidation to satisfy debt obligation and eligible for either Chapter 7 or Chapter 13 discharge.

Secured Debt

Most common are mortgage loans, car loans and title loans.

Debt is tied to an asset as collateral, giving creditor seizure or liquidation rights in the event of default.

More difficult to have discharged in bankruptcy, especially if considered a priority debt.

The majority of these debts are only eligible for discharge under a Chapter 13 repayment plan.