When you declare bankruptcy, the way the court will treat your financial debts depends upon the types of creditor claims. As a whole, the court will classify each of your debts as:
- a secured claim
- an unsecured claim, or
- a priority claim
Let’s have a deeper look on each type of creditor claims and what they mean.
What Is a Secured Claim
If a financial institution has a secured claim in bankruptcy, it implies that the creditor has a security interest on an item of residential property you own. Such claims could be voluntary or involuntary. If you pledge a property as collateral, it means that you offer the creditor a security interest in your assets of your own will. On the other hand, financial institutions can likewise get liens versus your house without your consent by force of law or via a court judgment.
Typically, the secured claims in bankruptcy include:
- car loans
- unpaid real property taxes, and
- various other types of liens on your home.
How Bankruptcy Affects Security Claims?
Just receiving a bankruptcy discharge will not automatically eliminate liens on your home or other assets (your discharge will typically just eliminate your individual responsibility for the debt). If you back-pedal a guaranteed responsibility, your creditor can still apply the lien by confiscating on or reclaiming your home after bankruptcy. This suggests that if you want to keep that asset, you will normally need to continue paying to the lending institution until you settle the debt.
But there are means to get rid of particular types of liens from your house in bankruptcy. Most commonly, you could be able to remove judgment liens that harm your bankruptcy exceptions or erase entirely unprotected junior liens from your property. For more information, it is better to contact a professional and experienced bankruptcy attorney like Jack Setters to get a free consultation regarding your particular situation.
What Is an Unsecured Claim?
A creditor obtains an unsecured claim i your bankruptcy case when it doesn’t have a lien against your property. As a whole, your bankruptcy discharge will remove most sorts of unsecured claims. Yet remember that certain unsecured debts (called priority claims) are not dischargeable in bankruptcy.
A few of one of the most typical unsecured bankruptcy claims you can release in bankruptcy include:.
- medical bills
- credit card debt
- personal loans.
What About Student Loans?
Student loans are additionally identified as nonpriority unsecured debts in bankruptcy. Yet you can not discharge them in bankruptcy unless you can prove to the court that it would certainly be an undue challenge on you to pay them (which is a tough criterion to show).
What Is a Priority Claim?
Priority claims are certain unsecured financial debts that are not dischargeable and also get special treatment in bankruptcy. Creditors that are considered to be priority must be paid first prior to various other creditors in bankruptcy as well as their claims survive your bankruptcy discharge.
The following are some of the most usual types of top priority cases in bankruptcy:.
- spousal support
- child support
- certain tax obligations, and
- debts for personal injury
You can’t eliminate priority debts just by filing for Chapter 7 or Chapter 13 bankruptcy and getting a discharge. However you can (as well as must) pay off your priority obligations through your repayment plan in Chapter 13 bankruptcy.
Get in touch with Jack Setters to discuss all of your options, including bankruptcy. Over the years, our company has helped tens of thousands of individuals and families eliminate their debt and reset their financial health. Now, we are ready to help you.