What Are Un-secured Debts?

Many people think of the debts they carry as burdensome and large. Did you realize that the debts come in many different categories? The most common debts filed in a Chapter 7 bankruptcy are un-secured debts. These are debts that are not secured by any property. In other words, when the debtor ceases payment on an unsecured debt, the lender does not have the ability to seize any particular property in lieu of payment for the debt.

Common examples of un-secured debts include:

  • credit cards
  • lines of credit
  • doctors
  • lawyers
  • medical debt
  • legal debt
  • past rents or eviction debt
  • deficiencies resulting from foreclosed homes
  • deficiencies resulting from repossessed vehicles
  • various other un-secured revolving accounts such as store accounts like a Macy’s or a Wal-Mart card.

Un-secured debts, provided that they are not priorities such as: taxes, student loans, child support and criminal restitution are dischargeable in a Chapter 7 bankruptcy.

In a Chapter 13 bankruptcy, un-secured debts that are not priorities fall under a category called class 4 creditors. These creditors receive a percentage of their balances paid back to them over the life of the plan. The balances left after the plan has been completed, are then eligible to receive a discharge. The discharge at the end of the Chapter 13 plan is very similar to the discharge received in a Chapter 7 bankruptcy. The difference is that the Chapter 13 discharge is only received after the completion of the Chapter 13 plan.

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