Facing bankruptcy can be a frightening experience for most individuals, although there’s no reason for it to be. Bankruptcy represents a fresh financial start and you should do your best to look at it like that. However, before you hire an expert bankruptcy lawyer in Rancho Bernardo, why not do some preliminary research on your own and get familiar with the different types of debt bankruptcy chapters recognize and go into your consultation prepared?

What are the different debts in bankruptcy?

Generally, all types of debt bankruptcy recognizes fall into one of three categories – non-priority unsecured debt, priority unsecured debt, and secured debt. Determining the difference between these debts in bankruptcy can be very difficult, which is why we’ve prepared a detailed overview of these debts with examples that will help you better understand each category:

Secured debt

This refers to debt backed by collateral that the creditor has the legal right to take in case you don’t pay your debt. Having a lien against a piece of property you own is a type of secured debt.

Also, it’s worth noting that there are voluntary and involuntary liens. A voluntary lien is one against your car or a property you own while continually paying for it, while an involuntary lien goes into effect after a creditor sues you and places a lien on your property.

The most common examples of secured debt include:

  • Civil lawsuit judgment liens
  • Tax liens on real estate
  • Personal loans that have collateral
  • Car loans
  • Home mortgages

Because every secured debt has a piece of your property backing it, you have to repay those types of debts in order to retain possession of the property attached to the specific debt. However, it is possible to avoid paying some involuntary liens in a bankruptcy.  You need to talk to a qualified bankruptcy attorney if you have involuntary liens. Generally, in Chapter 7 you have to remain current on debt repayments to keep possession of your property, while in Chapter 13 you’ll continue making payments and protecting your property from foreclosure by following the details of said plan.

Priority unsecured debt

Similarly to secured debt, you have to pay off all your priority unsecured debt to your creditors although they’re not secured by a collateral. This commonly refers to debts you have toward the government and they most commonly include:

  • Taxes
  • Spousal or child support
  • Criminal fines
  • Government benefit repayment

In a Chapter 13 bankruptcy, you continue paying these types of debts through your repayment plan. In Chapter 7, the priority unsecured debts survive bankruptcy and are not discharged.

Non-priority unsecured debt

Finally, non-priority unsecured debts are those types of debt that you’ll be able to fully discharge either through Chapter 7 or Chapter 13 bankruptcies. Once your bankruptcy procedure is done, you’ll owe none of your non-priority unsecured debts to your creditors. The most common debts that fall into this category are:

  • Medical bills
  • Credit cards
  • Past due utility bills
  • Personal loans that don’t have collateral

Which expert bankruptcy lawyer in Rancho Bernardo should I hire?

It’s important to explore all the different types of debt bankruptcy recognizes to better get ready for your process of filing. It’s important to start preparing to file for bankruptcy as soon as you notice the first signs of financial trouble. From there, all that’s left is to adequately choose between filing Chapter 13 or Chapter 7 bankruptcy and focus your attention on passing the means test. However, don’t forget to hire professional legal counsel to make all of it easier.

Chang & Diamond are here to make your process of filing for bankruptcy smooth and seamless. We’re one of the leading experts in different types of bankruptcy and we’ll grant you all the assistance you require. From filing your claim to representing your case in creditor meetings and in front of the court, you can rely on us. The sooner you contact us the sooner you’ll be able to enjoy Lake Hodges once again. Give us a call today!