Understanding the Debts Handled In a Bankruptcy

: Reese Baker & Associates

  Filed under: Debt

understanding debtMost individuals that are facing a load of debt aren’t really concerned about the type of debt that they have. To them debt is a debt and using bankruptcy as a form of debt relief is the choice that many are making.

It is during this process that they begin to understand that there are different types of debt. In many cases those going for bankruptcy are eligible for the Chapter 13 bankruptcy which is a repayment plan. This breaks the type of debt down that the individual has into segments such as priority, secured and unsecured debts.

Contrary to the belief of many the Chapter 13 bankruptcy does not totally wipe out the debt where the individual filing for bankruptcy no longer has to deal with them. This form of bankruptcy works on a repayment plan that is workable for the individual in the financial distress. The debts that receive the most attention to begin with are the priority debts. These will also include the cost of the bankruptcy itself and taxes.

Next in line for attention is the secured debts and these are debts that have collateral placed against them. Then finally there is the un-secured debts where there is no collateral used against them which if there were they could be seized because of nonpayment.

During the bankruptcy process all of your creditors will be notified that you are filing for bankruptcy. These creditors then have the option to file a proof of claim if they hope to get any of their money back. You as the individual that owes the money have the opportunity to object to these claims. If you do so the creditors must respond to your objections within a specific time. If they do not to do this then the claim can end up being modified based on the objection that you put forth.

Who receives what in regards to their payment as your creditors depends on what category their debt has been placed in. In most cases the priority creditors are always paid in full and the secured creditors are next in line and are usually paid in full as well. The unsecured creditors will get whatever is left over but very rarely do they receive the full amount of repayment back.

The best choice for you to make if you have decided that bankruptcy is the best option for you is to seek out the services of a Houston bankruptcy lawyer who will guide you through the entire process.