What are the chances that bankruptcy will clear all of one’s debt? Find the answer by talking to Bankruptcy Lawyers in Wetumpka AL. Lawyers will explain the three types of creditor claims.
Secured Claims
Indeed, most filers are concerned about this type of debt. Secured claims are those in which the creditor has a lien on the property. Secured debts include mortgages, vehicle notes, and unpaid real estate taxes.
The only thing that can be discharged in bankruptcy is one’s liability for the debt. Mortgage holders can still foreclose on real property and vehicles can be repossessed.
Unsecured Claims
Most unsecured claims are discharged in bankruptcy. These types of debts include credit cards and medical bills. However, the exception is student loans which must be paid. Also, some unsecured debts are called priority claims.
Priority claims cannot be discharged and include child support and alimony. However, child support and alimony arrears can be paid through a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Bankruptcy Lawyers in Wetumpka AL advise clients as to what type of bankruptcy to file. Chapter 7 is a liquidation bankruptcy wherein assets are sold off to pay creditors. Nonetheless, certain assets are exempt from the bankruptcy.
Most consumers are unaware of the income requirements for Chapter 7. Debtors must meet a means test to qualify for filing. The means test proves the debtor does not have enough money to repay creditors.
Chapter 7 bankruptcies are discharged in three to five months. Therefore, the debtor can quickly get a fresh start. On the down side, there is no way for debtors to pay arrears and keep real property and automobiles.
Chapter 13 Bankruptcy
Chapter 13 is a debt reorganization plan, and filers can keep their property. However, filers must make a monthly payment to the bankruptcy court. Arrears on secured claims can be included in the payment. Also, filers must make all current payments.
One of the main drawbacks is the length of the bankruptcy. Indeed, payments are spread over three to five years. Meanwhile, the debtor may be having difficulty paying the bankruptcy and current bills.
Remember, bankruptcy is a tool to help debtors and may not be the answer for everyone. For more information, visit Courtney & Mann LLP.
