When individuals get into great financial difficulty one of the best options available to them is to consider going bankrupt. Once they do this the first step of course is to seek out the advice and help of an experienced Louisville bankruptcy attorney. During the bankruptcy process there will be many sectors of the bankruptcy proceedings that can be a little confusing.
One of these is determining the secured debt versus unsecured debt. Most individuals assume that if they are going bankrupt that all debt is considered the same and that it will be totally wiped out. This is just one of the many misconceptions that can come with bankruptcy.
In most cases the type of debt that is discharged in a bankruptcy and again it will depend on which chapter is being filed for, is the unsecured debt. Unsecured debt is those that you have that you did not have to put up any type of collateral for. The common debts that fall into this realm are credit card debt and medical debt, for example. In this case there is nothing that the creditor can seize in order to cover the debt if you are in default.
You will often find that in unsecured debt that the interest rates that you are being charged is quite a bit higher. In most cases creditors that are holding a unsecured debt will only have the recourse of putting your debt in the hands of a collection agency.
When it comes to secured debt, this is different in that there is some sort of security that has been placed against it. For example, this may be your car loan with the car being the secured item that will be repossessed for nonpayment. Likewise, the same with apply to your mortgage.
When you go bankrupt in Chapter 7 and Chapter 13 bankruptcy the debts will be divided into various categories such as priority debt, secured debt, and unsecured debt, for example. They will each be handled differently depending on the Chapter.
The other thing that has to be considered is that there is an exemption list which means that some of the property that you own can be exempt from falling into the bankruptcy. There is a federal list and most states have their own list. Each state has their own rules when it comes to bankruptcy and this will determine which list is used in determining your exemptions. With the complexity that comes with bankruptcy this is why it is a good reason to have professional assistance while going through the process.