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Follow on Google News | Difference Between Secured and Unsecured DebtsIf you are considering filing for bankruptcy, you have probably heard about secured and unsecured debts. It is important to understand the difference between the two because they will affect your choice between Chapter 7 and Chapter 13 bankruptcy.
By: www.kalikalaw.com Secured Debts Secured debts are linked to a specific item of property called “collateral” You know you have a secured debt, if you have a mortgage on your home or a car loan. If you fail to make your mortgage payments, the lender can foreclose. If you fail to make your car payments, the lender can repossess the car. Some other types of secured debts include home equity loans, judicial liens, statutory liens, and tax liens. Unsecured Debts Unsecured debts are not secured by any property. If you fail to make a payment, there is no collateral that an unsecured creditor can take back. The most common types of unsecured debts are credit card debts, medical debts, debts arising from breach of contract or legal judgements against you. In a typical Chapter 7 bankruptcy case most, if not all, of your unsecured debts will be cancelled. If you have any nonexempt property, the trustee can sell some or all of it to pay your creditors. In a Chapter 13 case you keep your property. However, you will be required to pay back all or a portion of your debts over a period of three to five years. Secured Debts in Chapter 7 Bankruptcy A secured debt has two parts. It consists of your personal liability for a debt and the creditor’s legal claim on the property that secures the debt. Once your personal liability is eliminated in bankruptcy, the creditor cannot sue you to collect the debt. However, the creditor’s legal claim will stay with the property even if you give it to someone else. When you file for Chapter 7 bankruptcy, you get a chance to take additional steps to eliminate or reduce the creditor’s legal claims on your property, i.e. liens. You can choose to eliminate the liens on certain kinds of exempt secured property and can keep such property without paying anything to the creditor. You can also redeem the property by paying the creditor not to take the secured property. Finally, you can surrender the secured property to the creditor. If you do nothing to eliminate your liens as a part of your bankruptcy case, the lien will survive your bankruptcy intact. If the property is a house or a car and the creditor does nothing, the lien simply remains on the property until you sell it and the lien is paid out of the proceeds of the sale. The Law Office of Yelena Kalika was established to assist clients in reducing and eliminating their debts. The firm’s practice primarily focuses on Chapter 7 and Chapter 13 bankruptcy and consumer debt issues in the State of New York as well as business law. --- *If you'd like more information about this topic, or to schedule an interview with Yelena Kalika, please at (855) 357-3300 or e-mail at kalikalaw@gmail.com ----- About Ms. Kalika Yelena Kalika represents and assists individuals in consumer Chapter 7 and Chapter 13 bankruptcy and consumer debt matters. Areas of Practice Ms. Kalika’s practice primarily focuses on Chapter 7 and Chapter 13 bankruptcy and consumer debt issues in the State of New York and grant writing. She is admitted to practice in New York, New Jersey and in the Eastern, Southern and New Jersey Districts of the U.S. District Court. If you'd like more information about this topic, or to schedule an interview with Yelena Kalika, please visit us at http://www.kalikalaw.com, or call us at (855) 357-3300 ----- End
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