Debt is never a good thing, but when it comes to a chapter 7 bankruptcy filing your debt is sorted into two different types. Bankruptcy filers usually have both unsecured and secured debts. The main difference in these two types of debt is whether or not the debt has property attached to it. The type of debt you have influences how much relief a bankruptcy offers you, so read on to learn more.
When you applied for those credit cards, you very likely did not need to name any property to secure the card. With the exception of secured credit cards, the credit card company extends credit to applicants based on their ability to pay back the charges. They use your credit report and score to determine whether or not your credit gets approved.
When you fail to pay the minimum payments on the balance owed, credit card issuers have only one option available to them to collect on that debt. In most cases, the debt is turned over to a collection agency who will attempt to collect payment from you by sending letters and calling you repeatedly. If the amount you owe justifies a lawsuit, the creditor will take you to court and gain a judgment for the amount you owe plus court costs. You cannot be arrested or lose property, however, even if a court judgment is handed down.
Credit cards and personal (or signature) loans have no property to secure them. That means that a credit card debt listed on a bankruptcy results in zero potential for a loss of property. Make sure that you list each and every one of your credit card debts on your bankruptcy paperwork. As soon as you speak to a bankruptcy attorney, you do not need to pay any further minimum payments. As soon as your bankruptcy paperwork is filed with the court, you do not need to speak with another creditor or bill collector.
When you apply for a mortgage or an auto loan, there is property attached to the deal. The house and the vehicle themselves can be taken back if you fail to make the loan payments as agreed. Secured debt is one of the best reasons for taking action quickly if you plan to file for a chapter 7 bankruptcy. The longer you wait, the more likely you are to lose property through foreclosure or repossessions.
If you are able to declare bankruptcy before your property is taken, you may get a temporary period of relief. For a limited period of time (a matter of months), the creditors are barred from advancing legal procedures against you and taking your property. You must act quickly if you are to keep your property, however. It's important that you bring your payments up to date or you will end up losing property. It should be noted that you might have more disposable income available after you file. After all, you no longer have to pay credit card payments.
To learn more about these two types of debts, speak to a bankruptcy attorney, such as Charles J Schneider PC.
29 October 2018
Hello, my name is Neil Gamford. Welcome to my site about bankruptcy proceedings. After my divorce, I was left near penniless and without a place to stay. I was paying all of my income to alimony and my remaining debts. Although I had a solid payment plan in place, it was getting difficult to cover my financial obligations without a home. Luckily, I met with a bankruptcy attorney, who helped me find a way to discharge my debts and start over. I hope to share the information I learned throughout that process with you through this site. Please feel free to visit anytime.