Debt Management In Bankruptcy

Debt Management In Bankruptcy """Bankruptcy can be a useful instrument for reducing large debt loads, but there are instances in which it is not as beneficial as originally believed. The reason for this is because the majority of people have a limited understanding of the process and make assumptions about how it can aid them. No two people's financial circumstances are identical, nor are the risks and potential benefits associated with filing for bankruptcy. A basic understanding of the bankruptcy procedure can prevent a great deal of confusion.

Forms of Debt

Finding out that a particular debt is ineligible for discharge is a common issue encountered by individuals who file for bankruptcy. Different types of debts are dealt with in the bankruptcy procedure in vastly different ways. For instance, secured and unsecured debts are the two primary categories of debts managed in bankruptcy. A secured debt is one that is collateralized with an asset. These are debts, such as a mortgage or auto loan, for which the home or vehicle serves as collateral in case of default. Unsecured debt is a debt that is not backed by collateral. These are debts such as credit cards, medical expenses, and other loans that are only granted in exchange for a promise to repay.

It is more difficult to discharge a secured debt in bankruptcy than an unsecured debt. This is due to the fact that the creditor retains the legal right to repossess the asset if the debtor defaults. In order to have a secured debt discharged in a Chapter 7 bankruptcy, the borrower must typically surrender the collateral to the creditor in exchange for debt relief. However, if the borrower intends to retain the asset, only Chapter 13 bankruptcy would allow the debt to be discharged. In order to be eligible to retain the asset, the borrower must repay the debts in the Chapter 13 case.

The most common form of debt discharged in bankruptcy is unsecured debt. In most cases, unsecured debts are readily dischargeable under Chapter 7 or Chapter 13 bankruptcy. The distinction lies in whether the filer qualifies for Chapter 7 debt elimination or must instead file for Chapter 13.

Debt Discharge Exceptions

There are a few categories of debts that are challenging to manage in bankruptcy and may not even be dischargeable. Tax debts, student loan debts, and child support debts can significantly complicate the bankruptcy procedure. As a general rule, however, the only type of discharge for which these debts would qualify is a Chapter 13 repayment plan. There are bankruptcy laws that prevent these types of debts from being discharged under Chapter 7 and require repayment, at least in part.

" - https://www.affordablecebu.com/