When you speak with an attorney about filing bankruptcy, the attorney is going to ask you what types of debts you have and if you have secured or unsecured creditors.
Unsecured creditors are creditors with no collateral to which they are secured. Commonly, these are credit cards, medical debt, personal loans, payday loans, student loans, and tax debt.
Secured creditors are those creditors who take a security interest in your collateral to grant you funds. Commonly, these are mortgages, vehicles, and recreational loans. Tax debt can also be secured.
When a bankruptcy is filed, your unsecured debt will be discharged. Except for student loans, certain tax debts, and other exceptions. Your secured lenders have two pieces to them, though. First is the security interest, and second is your liability to pay the debt. When you file bankruptcy, your liability to pay the loan will be discharged in your bankruptcy. The security interest remains, though. What does this mean? If you want to keep the collateral tied to the loan, you must keep paying on it, even though your personal liability on the loan may be discharged. If you do not want the property tied to the loan, you can surrender the property back to the lender. If you give the property back due to the bankruptcy discharge, you should not be responsible for the remaining balance of the loan.
When you file bankruptcy, all of your creditors will receive notice that you filed—your secured creditors as well as your unsecured creditors. This is true even if you are going to keep paying your secured creditors and want to keep them.
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If you have questions about bankruptcy and would like to discuss your options in a free consultation, visit www.lifebacklaw.com to speak with an attorney. You will be glad you did!
