Most people who are considering bankruptcy have two kinds of debt: secured and unsecured. Secured debt is any debt that has been secured with assets as collateral. If a debtor defaults on secured debt, the creditor may have the option to repossess the property and sell it to repay the loan. Unsecured debt is any debt is the opposite since the creditor has no interest in any asset possessed by the debtor.
Credit cards, personal loans, and medical bills are all considered unsecured debts. Because there are no assets for the creditors to repossess, they may instead file a motion to garnish a debtor’s wages or to place a lien against other property.
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High interest rates, penalties, and other fees can lead to unsecured debts piling up quickly. At Melwani Law, we can provide you with the legal advice you need to determine the best course of action when you’re facing large amounts of credit card debt or other types.
Both Chapter 7 and Chapter 13 bankruptcy have provisions for dealing with unsecured debt.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is available to filers who can pass the means test. One of our Albuquerque bankruptcy lawyers will compare your income to the median income of your area and determine whether or not you qualify. Unsecured debts are typically discharged in this type of bankruptcy.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy allows debtors to reorganize their debts and create a repayment plan to repay their debts over typically a period of three to five years. If you are eligible to file a Chapter 13 bankruptcy, you will have the opportunity to catch up on your mortgage or vehicle payments, as well as, to include the remainder of the debt in your repayment plan. You may also be required to pay off a portion of your unsecured debts. Once your repayment plan has been completed, your remaining unsecured debts will be discharged.
Bankruptcy can be a positive and effective solution in times of economic hardship by eliminating debt. To learn more about your options, contact the Albuquerque, New Mexico bankruptcy attorneys at Melwani Law today for a free initial consultation.