An unsecured bankruptcy claim is a debt that was given to individuals without them providing creditors with collateral. According to the U.S. Bankruptcy Court, creditors make the unsecured claim instead of a secured claim when people file for bankruptcy because they hold no special assurance of payment. Thus, companies or people extended credit based only the companies’ assessment that the individuals will have the ability to make future payments, not because they knew they could collect if the individuals’ defaulted.
An Unsecured Claim Is Unsecured Debt People Owe
Typically, an unsecured claim in bankruptcy is considered standard type of consumer debt. These debts include personal loans, pay day loans, credit cards and medical bills. A secured claim is any debt secured by collateral such property or cars. The U.S. Bankruptcy Court considers any secured claim more important because some form of collateral was given to obtain the debt.
An Unsecured Claim Is Not a Priority in Bankruptcy
People have two options when filing personal bankruptcy. Chapter 7 provides people with an automatic stay which protects them against lawsuits or wage garnishments. In many bankruptcy cases, individuals must turn over their nonexempt property for bankruptcy trustees to sell. The money from the property sale goes to all creditors. However, priority claims such as mortgage companies receive payment first. If there is any money left any unsecured claims will be paid or discharged.
An Unsecured Claim Isn’t Always Unsecured
According to McFarlin & Geurts, LLP, people should look at any contracts that were signed to determine if the unsecured claim isn’t considered a cross-collateralization. When cross-collateralization occurs the unsecured debt is linked to property people have. For instance, individuals with home loans may receive a credit card application from the bank that holds the collateral. People may fill out the applications and receive credit cards without knowing that the credit card is tied to the mortgage they already have with the bank.
Contact a Lawyer
Anyone who must file an unsecured claim in a bankruptcy case or worried about who is considered an unsecured creditor in their bankruptcy should contact a lawyer. An experienced bankruptcy lawyer can help a creditor obtain and properly fill out the appropriate paperwork to make an unsecured claim. Also, for anyone filing bankruptcy, a lawyer can them through the bankruptcy process and make sure that all unsecured creditors are listed.
