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Chapter 7 and unsecured debts

Consumers who live in North Carolina may well be looking at their credit card statements in January and feeling concerned about how they will pay off their holiday debts. This is not an uncommon situation but if those people went into the holiday period already struggling to keep up with their debt, the problem could make them consider filing for bankruptcy.

Bankruptcy can offer people a fresh financial start but before rushing into making the decision to pursue this path, it is important to understand what type of bankruptcy plan might be right for them and why. This starts with understanding the two primary types of debt.

The Motley Fool explains that secured debt is that which is associated with collateral like a car loan is with an automobile or a mortgage is with a house. Unsecured debt has no associated collateral. Examples of unsecured debt include medical bills, credit card debt and student loans.

According to NerdWallet, a Chapter 7 bankuptcy allows unsecured debts that qualify to be forgiven without any repayment. Secured debts may end up being repaid in the form of the loss of assets. This is why people hear about consumers losing their homes during bankruptcy. It is for this reason that a Chapter 7 plan is sometimes considered better for consumers who have large amounts of unsecured versus secured debt. Chapter 13 bankruptcy plans may be good options for people who want to avoid losing their homes, cars or other assets but who still need debt relief assistance. 

 

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Sigmon & Henderson, PLLC
518 S New Hope Road
Gastonia, NC 28054

Phone: 704-269-6374
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