If you are considering filing a Chapter 7 or Chapter 13 bankruptcy in St. Charles or St. Louis County it is important to be able to classify your debts as secured and unsecured.  These debts are treated very differently in both Chapter 7 bankruptcies and Chapter 13 bankruptcies.  If you file a Chapter 7 all of your unsecured debts will be discharged in the bankruptcy.  However, if you file a Chapter 13 it is possible that all of your unsecured debts will be discharged, but for some people, a portion or sometimes even all of the unsecured debt will have to be paid back through the Chapter 13 plan, depending on different factors.

The most common types of unsecured debts are credit cards or medical bills.  Unsecured debts are debts that are not secured by any of your property.  If you were to default on these debts, the only way the creditor could collect money from you would be to file a case in court and get a judgment rendered against you for the contract price.  Once this happens, the creditor could begin to garnish wages or place a levy on your bank account, essentially freezing it and whatever cash you have in it.  This is where a Chapter 7 or Chapter 13 bankruptcy will help you out.  The bankruptcy will stop the garnishment or levy and eventually discharge the unsecured debt.  Other types of unsecured debts are pay day loans, overdraft charges on bank accounts, old utility bills, deficiencies on repossessed vehicles or foreclosures and, in some cases, tax debt.

Secured debts are debts that are linked to some sort of collateral (personal or real property).  The most common type of secured debt is a home mortgage.  The mortgage is the debt and the collateral is the house.  In a bankruptcy, if you wanted to keep the property (the home) then you would have to pay the secured debt; the mortgage.  If you wanted to surrender the house, then the debt would be listed as unsecured debt, would be discharged in the bankruptcy, and you would not have to pay back any money owed on the mortgage.  Another type of secured debt is your car loan.  The loan is the debt and the security interest is the vehicle.  If you are not paying on your vehicle, the finance company can have the vehicle repossessed.  If you file a bankruptcy, you can keep these secured debts.  If they have equity in them it may be in your best interest to file a Chapter 13 bankruptcy or you may have to surrender them.  However, if you have no equity in your secured debts and meet the other requirements for a Chapter 7 bankruptcy then that may be the best option for you.

If you have questions about this article or any other general questions regarding bankruptcy I would advise you to contact a St. Louis bankruptcy attorney today.  At The Kline Law Firm, we offer free consultations at 3 different locations (South City, St. Charles and North County St. Louis) and would be happy to take some time to speak with you about any questions or concerns that you might have regarding your finances and filing bankruptcy.