Chapter 7 bankruptcy does not require you to immediately repay your debt. The trustees will take any non-exempt properties and sell it to distribute your assets among your creditors. After completing this bankruptcy process, your bankruptcy discharge will wipe out all your qualifying dischargeable debts.
Secured debts are those which the creditor takes as collateral for the loan that you owe them. Among the secured debts, your home and car loan are the most common. Even if your house is worth less than the debt you owe, the creditor cannot claim anything else from you to manage the difference according to a deficiency judgment. Still, if you want to keep your property, you can tell that to the court and reaffirm your debt. You can also relinquish your secured debt if you no longer wish to keep the collateral during your bankruptcy.
On the contrary to secured debts, unsecured are the ones that are not secured by collateral. You can count medical bills and credit card debt in this category, where unsecured creditors have no right to take your property. The payment for unsecured creditors is based on priority, including child support, tax debts, and spouse support. Priority debt will be paid first from the bankruptcy estate and the rest of the funds collected will be distributed to the other creditors.
If you have questions about the types of debt you can eliminate and would like financial relief, contact a Fort Worth bankruptcy attorney.