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Which Bankruptcy Is Best For Your Debt?

February 28, 2012 | Comments: 0 | Views: 174

When it comes to filing for bankruptcy, the choice is often a difficult one. To make matters worse, most people have very little idea of how the process actually works. The problem with having a limited understanding of the bankruptcy process is that it is easier for mistakes to be made, ones that could drastically impact the outcome of the case.

The first step before deciding to file for bankruptcy is to get an idea of the type of debt being carried and how that influences the type of case to file. Get to know each type of bankruptcy and the associated risks and benefits of each.

Unsecured Debts

The most commonly held type is an unsecured debt. These debts are called "unsecured" because they do not hold any asset or property against the loan as collateral. Credit cards, medical bills, tax debts, student loan debts and some personal loans are considered unsecured debts. These debts are also the most commonused to file for discharge when seeking bankruptcy.

The biggest concern regarding unsecured debts is how they are managed in a bankruptcy filing. In general, most of these are easily eliminated in a Chapter 7 case. Because creditors do not hold any repossession or liquidation rights over an asset, these can be discharged with little risk or payment from the debtor. However, tax debts and student loans cannot be discharged under Chapter 7, but instead must be repaid through Chapter 13 bankruptcy. It is also important to note that a creditor may still be eligible to seize certain personal assets in a Chapter 7 case if the court deems the debtor's assets to be sufficient for repayment.

Secured Debts

Secured debts are typically the largest of the debts held by most people. Mortgages, car loans, retail credit cards and title loans are all examples of secured debts. These give the creditor repossession rights over a specific asset in the even the debtor defaults on the loan. For this reason, managing them in bankruptcy can be more difficult.

In nearly all cases, the debtor will be required to repayif they desire to keep the asset. It is very rare for a debtor to be allowed to keep a secured debt asset in bankruptcy without making some repayment towards the loan. Secured debts are generally managed through Chapter 13 cases, which allow for the debtor to repay their debts over a three to five year period.

The Lee Law Firms aims to help local residents resolve their debt issues and achieve a financially healthy future. They provide high quality legal representation that helps lower monthly debt payments, stop wage garnishment,prevent foreclosures and repossessions, and stop calls from creditors. The Lee Law Firm bankruptcy lawyer in Fort Worth have many years of experience in all aspects of Chapter 7 and Chapter 13 Bankruptcy.

Source: EzineArticles
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