Debt Differences In Bankruptcy
Having debt is not always a bad thing. In fact, a high credit score is often the result of debt. However, debt can quickly go from helping your credit profile to hurting it when debt begins to outweigh income. Further, the type of debt you carry may have a significant impact on your credit profile.
There are several types of debt. Credit card debt, also known as revolving debt, is the most common type of debt, and the easiest to acquire. A credit card is a line of credit with a credit limit that allows you to borrow money and pay it back over a period of time. Credit cards are convenient, but they can be dangerous if not used responsibly. Credit card debt, coupled with other types of debt, can be detrimental to your credit profile. Credit card debt is one of the easier types of debt to have eliminated through bankruptcy. This is because credit card debt is a type of unsecured debt. Unsecured debts are not tied to collateral; making them candidates for an easy bankruptcy discharge.
Mortgage debt is secured debt. Mortgages are long-term loans secured by a home or other real estate. They are often used to buy a home or refinance an existing home loan. Mortgages are difficult to eliminate through bankruptcy because they are long-term loans that are secured by a home, and homes are difficult to liquidate. However, mortgages may be more manageable than credit card debt because of the lower interest rates and longer repayment terms typically associated with mortgages.
Auto loans are loans for the purchase or refinancing of an automobile. They are often used to buy a car, but can also be used to refinance an existing auto loan. Like mortgages, auto loans may be eliminated through bankruptcy, but are difficult to eliminate because they are secured by a vehicle that the borrower can usually recover after bankruptcy.
Student loan debt is the newest type of debt to emerge on the market. Student loans are typically used to pay for an education. Virtually all students who attend college take out student loans, but they are not limited to college students. Student loans are available for students who are pursuing vocational, technical or advanced degrees. Like mortgages and auto loans, student loans can be eliminated through bankruptcy, but are difficult to eliminate because they are presumed to be non-dischargeable while there is still strength in the borrower's future income.
Whatever type of debt you are carrying, there is a solution to regain financial freedom. Contact our Citrus Heights bankruptcy attorney office today to learn more about how bankruptcy can free you from your debt burden.