Consumer debt is classified as secured and unsecured debt. Secured debt is where there is collateral such as a home or a car. If you stop making payments, the lender will take back your collateral and sell it to try to recover the debt.
Unsecured debt is based on a promise to pay. Credit cards, personal loans, student loans, taxes, medical bills, child support, and alimony are some examples of unsecured debt.
Credit Card Debt
Credit card debt in the United States is over a trillion dollars and rising. According to Credit Donkey, Over 38% of Americans have credit card debt, and the average interest is 16.46%.
Chapter 7 and Unsecured Debt
In a Chapter 7 bankruptcy, your unsecured debt is discharged or eliminated, after your nonexempt property is sold and distributed to your creditors. Any debt remaining after the bankruptcy process will be dismissed. Frequently, the consumer does not have any assets to liquidate
Chapter 13 and Unsecured Debt
In a Chapter 13 bankruptcy case the debtor sets up a court-approved repayment plan during the course of three to five years. Secured debt and other priority debt will be paid first, unsecured debt will be lower on the list of who gets paid. Once your bankruptcy period is over, any remaining debt will be discharged. You will, of course, have to continue paying on your home and vehicles if you wish to keep them.
Non Discharged Debt
Your court-ordered alimony and child support will never be dismissed in either Chapter 7 or Chapter 13 bankruptcy. Depending on how old your tax debt will determine if it can also be eliminated when your bankruptcy process is over.
If you have too much credit card debt or loans or if you are overwhelmed with medical bills and past taxes, contact a Cincinnati bankruptcy attorney to find out if you can eliminate your debt and obtain a fresh financial start