If you are considering bankruptcy, you probably know the basics; much of your debt will be discharged and you may have to give up some property.
Many people own a home and a car, have credit card debt, and perhaps miscellaneous other debts. Whatever debts you have can be categorized as “secured” or “unsecured” and they are treated differently in bankruptcy.
A secured debt refers to money you owe for something you bought. In particular, it is something the lender has a right to take from you if you fail to keep up payments. The something is called “collateral.”
In bankruptcy, you may or may not lose these items. If you are deep in debt and are declaring bankruptcy, but keep current on your car payments, for example, you may not have to give up the car.
Unsecured debts, by contrast, are not linked to any real estate or personal property. Most credit card debt for example is unsecured. If you fail to pay on this debt, there is nothing the lender can take from you. (Why would a lender loan you money without the recourse of taking property from you? It is because they charge higher interest on the loan. The risk that you will default is higher, so they demand a higher interest rate). Much of this debt is simply discharged.
A mortgage is a secured debt. If you are in default on your home mortgage, the lender may be in the process of foreclosing and taking the home. Unfortunately, even if they sell the home and keep the proceeds, if this is less than the amount you owe, they might try to get the balance from you.
Home equity loans are also secured debts. In today’s market many homeowners got home equity loans (when their home had equity) to pay bills, buy cars or other big items. Now they find that they owe more for the first mortgage than the home is worth, not to mention the home equity loan. In that situation a Chapter 13 bankruptcy may be able to strip the home equity loan from the home and treat it as an unsecured debt.
Contact us to discuss your situation and your debts. We will answer your questions, explain your Chapter 7 liquidation or Chapter 13 options and handle your bankruptcy filing for bankruptcy serves you best.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.