Loan Debts In Bankruptcy
There are several types of loans that consumers can choose from when it comes to borrowing money. Payday loans, title loans and personal loans are the quickest, easiest option for anyone needing fast cash, but, they are risky. Other types of loans are more exclusive, often requiring criteria that make it difficult for the average borrower to obtain easily. While both avenues serve a purpose, the options to consumers are far from equal.
Types Of Loans
In general, loans fall into one of two categories: secured loans and unsecured loans. Secured loans are any lines of credit that are tied to assets or property as collateral, such as car loans and mortgages. If the borrower defaults on the loan payment, the loan lender has the right to repossess or liquidate the asset to satisfy the debt owed. Unsecured loans are lines of credit that are not tied to assets or property as collateral. If the borrower defaults, the loan lender only has debt collection and traditional legal avenues for obtaining the debt owed.
In a bankruptcy, how loan debts are handled varies by the loan type, as well as whether that loan debt is also considered a “priority debt”. Secured debts are not eligible for a traditional debt elimination as most commonly thought of when someone discusses filing for bankruptcy. Secured debts in bankruptcy are most often satisfied through a Chapter 13 repayment plan. Borrowers can repay a portion of the debt through a series of affordable monthly payments, while keeping the property or asset. Unsecured debts are often eligible for either a Chapter 7 debt elimination or Chapter 13 repayment plan, depending on the finances of the borrower.
If you have questions about your debt or how bankruptcy can give you a fresh start, contact our Sacramento bankruptcy office today at (916) 459-2364.