If Your Debts Are Mostly Secured, Should You File for Bankruptcy?
Many people who have considered bankruptcy are aware of the fact that bankruptcy treats secured and unsecured debts very differently. If most of your debt is secured, should you even consider bankruptcy? If not, what are your other options?
Secured debts are debts that are attached to your assets. A home mortgage is a good example. If you do not pay your mortgage, your lender can take back your home in a foreclosure action. Other debts that are commonly secured are car loans and appliance loans.
The Bankruptcy Code categorizes secured debt as “nondischargeable.” This means that secured debt cannot be forgiven in bankruptcy, and will therefore still be owed after you complete the bankruptcy process. Many people who have secured loans think twice about bankruptcy because of this. And if most of your debt is secured, bankruptcy will probably not get rid of much of your debt.
However, there are a couple of things that bankruptcy can do to help you if you cannot afford to make your payments but have mostly secured debt. First, bankruptcy can buy you time and stop your creditors from harassing you. This can be invaluable for people who are not extremely far behind on their obligations.
Additionally, Chapter 13 is often recommended to people with a great deal of secured debt. In Chapter 13, you create a plan to pay back your debt for three to five years. The plan is based on your income and expenses, and it must be affordable for you. This means the plan is not based on what your creditors want to be paid or how much you owe them, and gives you much more flexibility and control in determining the amount your payments will be.
During a Chapter 13 plan, you can modify loans, and you can even strip off second mortgages. These are benefits that a filer of Chapter 13 can only obtain. They do not exist in Chapter 7.
For those who believe bankruptcy is not the best option for them, there are alternatives to bankruptcy you can discuss with an attorney.
Stephen M. Trezza
Get a detail information about filing bankruptcy.People are mostly confused in the subject of secured and unsecured debts.They can not understand the difference between these two types of debts.i saw may people who are going to file bankruptcy but they do not know whether their debt will be discharged in bankruptcy or not.
Thank you for the post