There are two basic types of debt, secured and unsecured. Depending on the type of debt you have the most of will determine the best Chapter of bankruptcy you should file.
Secured debt is where your loan is backed by collateral. Your home mortgage and vehicle loans are two types of secured debt. If you fail to make these payments, you will probably lose your home or your car. When you are falling behind on bills, these are the types of payments you should make first if you want to keep these assets.
Unsecured debt is backed only by your promise to pay. These type of debts usually include credit cards, medical bills, payday loans, personal loans. Unsecured debt is often where overwhelmed debtors only make the minimum payments barely keeping up, or stop making payments altogether.
While Tax debt, alimony and child support is unsecured debt, you don’t want to miss these payments or the government can take action to seize your accounts or garnish your wages.
Chapter 7, or liquidation bankruptcy usually deals with unsecured debt. In this type of bankruptcy, all of your qualifying unsecured debt will be wiped away in as little as three to six months.
Chapter 13 bankruptcy is for debtors that have fallen behind in the secured debt and wish to keep their home or their vehicle. This type of bankruptcy you make a court-approved repayment plan, and for three to five years, you make one payment to the trustee, and they will distribute it to your creditors. Any remaining qualifying debt after you have made your payments will be eliminated.
Contact a McAllen bankruptcy attorney for more information on what you can do to eliminate your debt.