Types Of Debt In A Bankruptcy Filing

Types Of Debt In A Bankruptcy Filing "Bankruptcy is not something that everyone wishes to do, but when credit card debt and mortgage payments become delinquent, the decision to file bankruptcy must be made. With the financial collapse in the United States and record levels of unemployment, it seems inevitable that many people will be forced to file for chapter 7 bankruptcy. This is not the end of the road for these individuals, thankfully. Consumers should learn from their past financial errors and fight for a better future by paying off their credit card debt. The new law makes it slightly more difficult to petition for Chapter 7 bankruptcy. Now, under the Bankruptcy Code of 2005, everyone is required to undergo a means test. This test requires that your income be at or below the state's median income. For the majority of individuals, declaring bankruptcy is the last and only option.The moment you file for bankruptcy, the court issues an automatic stay, which promptly halts all actions taken against your property by creditors or collection agencies, as well as any pending lawsuits or foreclosures. When you file for bankruptcy, essentially everyone you owe money to must substantiate to a bankruptcy court that you owe them the money. The trustee assigned to you will then determine, based on your assets and current income, which creditors and bills will be paid with your remaining unexempted assets. The Automatic Stay can be a powerful tool if you are being evicted, foreclosed upon, behind on utility bills and threatened with disconnection, late on your vehicle payment, and for a variety of other reasons. You can see how this would assist you in times of financial difficulty.There are two categories of debts in a bankruptcy filing: secured and then unsecured. Simply put, secured debts are backed by collateral while unsecured debts are not. Mortgages and auto loans are the two most prevalent forms of secured debt. Creditors reduce the risk of the loan by requiring collateral, such as a claim on a house, automobile, or other property. There are two components to these loans: a pledge to repay the debt and the right to sell the property if the promise is not kept. This right to the property endures discharge in bankruptcy. If a borrower is in default, the right to sell the property is activated. It is imperative that you consult with a bankruptcy attorney to determine if filing for bankruptcy in your state will result in a default. If a borrower fails to make timely loan payments, the creditor's only recourse may be foreclosure or repossession. In fact, this may be the only method for a creditor to obtain the property's title in order to sell it.Credit card debts, such as Visa or MasterCard, are almost always unsecured. This means that they will be discharged upon registering for bankruptcy. It makes no difference whether the card is used for domestic items, business expenses, or travel. Obviously, if you use a credit card within 90 days of filing for bankruptcy or if you knew you were going to have to file bankruptcy, such use may be deemed fraudulent and therefore not dischargeable. Typical secured cards are those issued by electronic retailers such as Best Buy. With high-priced purchases, such as a computer, electronic companies tend to secure your use of the card. Thus, if you file for Chapter 7 bankruptcy, you may be required to return the computer or continue making payments. Frequently, however, the store cannot produce the required documentation to prove the items are being secured, and you will be allowed to retain the property and be released from the debt.
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