Most consumer debt can be classified into two types, either secured and unsecured. This can be useful to know what type your debt is when you are considering bankruptcy. Secured debt has collateral attached to it, such as a vehicle or home. Unsecured debt is usually based on creditworthiness and a promise to make the payments.
Credit cards, medical bills, payday loans, past utility bills are some of the debt that falls under the unsecured category. Alimony and child support also fall under this category, but failure to pay can have negative consequences up to and including jail time. Other types of unsecured debt that can usually not be discharged in bankruptcy are some taxes, student loans, and fines being paid to government agencies.
If most of your debt is unsecured debt, Chapter 7 bankruptcy may be the best option for you. Within three to six months, your qualifying unsecured debt can be wiped away. You will have no more legal obligation to make these payments.
Failure to keep up on your secured debt could cost you your collateral. The foreclosure process usually starts on the third missed payments. The lender has the right to seize the property when you stop making the payments.
Vehicle payments are the most common types of secured debt in the United States. Most of us like having easy access to reliable transportation whenever we want it. Usually written in the vehicle loan contract, if you are late on a single payment, the lender has the right to take possession of the car. It usually doesn’t happen this fast, and the lender would prefer you pay the full amount of the vehicle plus any interest. Just know that if you are a couple of months behind, you may start looking for the repo person to come to your door.
Filing bankruptcy can stop all collection attempts against you. If you have loans with collateral and you would like to keep those assets, Chapter 13 will give you three to five years to catch up on those payments and keep your home or car.
If you would like more information on how bankruptcy can help you get financial relief, contact a Dallas bankruptcy attorney.