There are three main types of debt, and the category your debts fall under will play a major role in how they are handled by the courts when you file for bankruptcy. The three types of debts are secured, unsecured, and priority claims.
Secured, Unsecured, and Priority Claims for Bankruptcy
Secured claims are defined as obligations that you owe which are backed by physical collateral. When you’ve defaulted on paying your debts, your creditor can repossess or take claim of the collateral. These types of debts are created with a lien. The types of property that are often used as collateral include vehicles, homes, and other property. Creditors can pursue repossession or foreclosure when you default on payments.
Unsecured claims, on the other hand, don’t have any liens attached to them. Credit card debt, personal loans ,and medical expenses would be considered unsecured claims. Creditors will need to sue you in court before they can take your property.
When you file for bankruptcy, secured claims won’t automatically be cleared. You will need to work out a payment plan with your creditor. If you don’t, then your lender may continue to pursue their lien after your bankruptcy proceedings are over. Filing for bankruptcy will typically discharge unsecured claims.
Priority claims are a type of unsecured claim that will not be discharged. Common types of priority claims include child support, alimony, debts for personal injury, and tax obligations. You will need to create a repayment plan to pay these debts off regardless of your bankruptcy status.
Contact an Experienced Cherry Hill Bankruptcy Attorney to Discuss Your Debt Relief Options
New Jersey bankruptcy attorney Joel R. Spivack has helped clients find financial relief for the past 30 years. He will work with you to discuss your debt relief options, and he will ensure that your interests are protected. To learn more about whether filing for bankruptcy is right for you and your family, contact the Law Office of Joel R. Spivack at 856-488-1200.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.