Are All Debts Treated the Same in a Consumer Bankruptcy Case?
Whether you are considering the possibility of consumer bankruptcy or you have already made the decision to file, it is important to understand how your debts will be treated in a bankruptcy case. As such, you may be wondering if all debts are treated the same in a personal bankruptcy case, or if certain debts are handled differently. Generally speaking, debts in a bankruptcy case can be categorized as secured debt, priority unsecured debt, and non-priority unsecured debt. In addition, you should know that student loans are handled a bit differently in bankruptcy cases, and there are also types of debt that are ineligible for discharge. Our Oak Park bankruptcy lawyers have more information to explain the types of debts in bankruptcy cases and how they are handled.
Secured Debt, Priority Unsecured Debt, and Non-Priority Unsecured Debt
First, it is important to understand the differences between secured and unsecured debt. Secured debt is debt for which there is collateral, which means the debt is attached to specific property that the creditor can repossess if you do not make payments. Common examples of secured debt include mortgages and automobile loans.
Unsecured debt, differently, does not have any collateral attached to it, and there is no property for the creditor to repossess if a debtor does not make payments. With unsecured debt, a creditor can still obtain a judgment against you or place a lien on property you own in order to recover, but there is no specific collateral connected to the original debt.
How Courts Handle These Types of Debt
How do bankruptcy courts handle distinctions among secured debt and priority versus non-priority unsecured debt? In a bankruptcy case, to retain secured property, you will need to repay your debt. In a Chapter 7 case, this means the debt cannot be discharged if you want to keep the asset, and in Chapter 13, it means the debt will need to be repaid through the repayment plan.
In a bankruptcy case, creditors that have priority unsecured debts will be repaid before other creditors in a Chapter 7 case, and they will need to be repaid in full in a Chapter 13 bankruptcy case through the debtor’s bankruptcy plan. Common types of priority unsecured debt include certain types of tax debt and family support. Non-priority unsecured debt, if it is dischargeable, can be discharged in a consumer bankruptcy case. Common types of non-priority unsecured debt include, for example, medical debt and credit card debt.
Debts That Cannot be Discharged and Other Circumstances
Some types of debt cannot be discharged through a bankruptcy case, including certain types of tax debt, family support, and certain government fines. Even if you qualify for Chapter 7 or Chapter 13 bankruptcy, these debts cannot be discharged. Student loans can be discharged, but a debtor will need to prove an undue hardship in order to be eligible for that debt to be discharged under current U.S. bankruptcy law.
Contact an Oak Park Bankruptcy Lawyer
If you have questions about different types of debt in bankruptcy, one of our Oak Park bankruptcy attorneys can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Things to Know About Student Loans and Consumer Bankruptcy
Consumers Who Own Small Businesses and Want to File for Bankruptcy
Secured Debt, Priority Unsecured Debt, and Non-Priority Unsecured Debt
First, it is important to understand the differences between secured and unsecured debt. Secured debt is debt for which there is collateral, which means the debt is attached to specific property that the creditor can repossess if you do not make payments. Common examples of secured debt include mortgages and automobile loans.
Unsecured debt, differently, does not have any collateral attached to it, and there is no property for the creditor to repossess if a debtor does not make payments. With unsecured debt, a creditor can still obtain a judgment against you or place a lien on property you own in order to recover, but there is no specific collateral connected to the original debt.
How Courts Handle These Types of Debt
How do bankruptcy courts handle distinctions among secured debt and priority versus non-priority unsecured debt? In a bankruptcy case, to retain secured property, you will need to repay your debt. In a Chapter 7 case, this means the debt cannot be discharged if you want to keep the asset, and in Chapter 13, it means the debt will need to be repaid through the repayment plan.
In a bankruptcy case, creditors that have priority unsecured debts will be repaid before other creditors in a Chapter 7 case, and they will need to be repaid in full in a Chapter 13 bankruptcy case through the debtor’s bankruptcy plan. Common types of priority unsecured debt include certain types of tax debt and family support. Non-priority unsecured debt, if it is dischargeable, can be discharged in a consumer bankruptcy case. Common types of non-priority unsecured debt include, for example, medical debt and credit card debt.
Debts That Cannot be Discharged and Other Circumstances
Some types of debt cannot be discharged through a bankruptcy case, including certain types of tax debt, family support, and certain government fines. Even if you qualify for Chapter 7 or Chapter 13 bankruptcy, these debts cannot be discharged. Student loans can be discharged, but a debtor will need to prove an undue hardship in order to be eligible for that debt to be discharged under current U.S. bankruptcy law.
Contact an Oak Park Bankruptcy Lawyer
If you have questions about different types of debt in bankruptcy, one of our Oak Park bankruptcy attorneys can assist you. Contact the Emerson Law Firm today.
See Related Blog Posts:
Things to Know About Student Loans and Consumer Bankruptcy
Consumers Who Own Small Businesses and Want to File for Bankruptcy
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