Different Categories of Debts During Bankruptcy

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Different Categories of Debts During Bankruptcy

Bankruptcy can be a complicated process especially when the filer possesses different kinds of debts. Classifying the debts in the right order or priority might seem simple but is a very complicated process. These debts can be replaced by a phrase called ‘lender claims’ or ‘creditor claim’. The first step to this complicated process is to segregate debt between secured and unsecured debts. Secured means debts which have a lien or a security backing in the form of collateral. You will use Schedule D to list such secured creditors. While unsecured debts are debts which are given without any security or asset backing and are usually offered at a high rate of interest. You will use Schedule E or Schedule F for listing unsecured lenders.

The unsecured debts are to be further classified under priority and non-priority debts. Priority debts might include tax debts, utility payment debts, child support, alimony, etc. These priority debts are to be reported in Part 1 of the schedule while all other non-priority debts or non-categorized can be reported in Part 2. To know more such information about bankruptcy and find a suitable attorney for professional advice and solutions, log on to https://bankruptcy.recoverylawgroup.com/

Secured claims and bankruptcy

During bankruptcy, the secured creditors enjoy an advantageous position as the lien on the asset pertains after bankruptcy. They can exercise the right to foreclosure or re-access the property labeled as collateral for the transaction. The only benefit the bankruptcy filer gets is extra time to repay the debt if he/she plans to retain the asset or debt settlement if he/she is willing to give away the asset specified as collateral in the loan agreement. Having more equity in mortgage or auto loan will prompt the bankruptcy trustee to sell off the asset. Also, the bankruptcy filer will be entitled to any exemption amount or any equity amount that could be protected in the secured mortgage or auto loan.

If the bankruptcy trustee cannot realize sufficient funds to set off the exemptions and a good portion of lender claims, the bankruptcy will resist selling off lien assets. If you had like to give away your assets and settle all your debts, Chapter 7 is a good option and if you wish to keep your assets at any cost, Chapter 13 bankruptcy California is the best option for you. You can also gain an advantageous position by relaxing or evading certain liens. Getting rid of any judgment liens that are over and beyond bankruptcy can certainly help. Under Chapter 13, with a skilled attorney, you can also get rid of the unsecured junior lien. These falls under adversary proceedings and only a professional attorney might be able to guide you on this.

Unsecured claims and bankruptcy

Unsecured creditors might not be very happy. They might be really-really upset if they are in the non-priority side of claims. The Chapter 7 bankruptcy code is known for eliminating most of the non-priority debts with minimal or no payments. However, the priority debts like any income tax debt, child support, alimony, student loans, penalties, fines, etc., cannot be released or discharged by the bankruptcy court. In such a scenario, you are held liable for all these debts even after bankruptcy and they just don’t vanish or get settled like most debts under Chapter 7 bankruptcy. Medical bills, credit card bills, payday or personal loans, etc., fall into the category of non-priority debts. To know the best possibilities for your bankruptcy case, reach out to 888-297-6203 now!