For the purpose of figuring out what type of bankruptcy will suit you best, you need to know how most of your debt is classified. Typically, consumer debt falls into two categories, secured and unsecured. Unsecured debt is obtained by a favorable credit score and a promise to pay, such as credit cards, medical debt, payday loans, utility bills. Secured debt usually has some type of collateral, like a home or a car.
According to a recent article in CNBC, 55% of American households have credit card debt. If your debt is from credit cards, personal loans, and medical bills, you have unsecured debt. When you fall behind in these payments, you will start to receive phone calls and letters asking for your payment. If you fail to pay these bills, your creditors could potentially sue you for the debt. If your creditors are successful in their suit, the judge could allow a lien against your home or your property.
If you are behind in your house payment to your mortgage company or behind in your vehicle note, you have secured debt issues. Under certain conditions these lenders will have the right to seize the property held as collateral after you start missing payments. If you wish to keep the collateral, you should speak to the lenders to try to work something out. If they are unwilling to work with you or don’t give you enough time, you have bankruptcy options.
Chapter 7 bankruptcy mostly deals with unsecured debt. In as little as four to six months, all of your qualifying unsecured debt can be eliminated. Some unsecured debt like child support and alimony will not be discharged in bankruptcy, and you will need to continue to make these payments.
Chapter 13 bankruptcy helps those that have secured property they would like to keep but are behind in payments. Usually, they have received a foreclosure notice or notice to repossess the vehicle when they file bankruptcy. Chapter 13 is considered a reorganization bankruptcy. You will have three to five years under a court-approved repayment plan to pay your arrears. When you have successfully completed your payments, any unsecured debt remaining will be discharged. You will need to continue to pay your secured debt if you wish to keep the collateral.
No matter what type of debt, or what kind of bankruptcy you file, the automatic stay interrupts all collection attempts against you. Phone calls, letters, wage garnishments, foreclosures, evictions, repossessions, utility shut-offs all must be delayed until you make arrangements with the court how you will proceed with your debt, either eliminating it or reorganizing it.
If you have questions about how bankruptcy can benefit you, contact a Roseville bankruptcy attorney today.