If you are thinking about filing for Chapter 7 or Chapter 13 bankruptcy, it is important to examine all of your debts and figure out if they are secured or unsecured. Each type of debt is treated differently depending on whether you file for Chapter 7 or Chapter 13 bankrutpcy.
Not all debts are discharged just because you filed for bankruptcy. Frequently, whether a debt is discharged in Chapter 7 bankruptcy or how it is treated in your Chapter 13 repayment plan depends on whether the debt is secured or unsecured.
Secured debts are debts that are linked to some type of property that you own (called the "collateral"). If you default on the loan, the creditor can take the property. There are two types of secured debts -- those which you agree to, and those which you don't.
The first type, secured loans that you agree to, include:
The second type -- when you don't pledge property as security for the loan -- are called nonconsensual liens. Here are some examples:
Unsecured debts are not secured by your property. If you default, the creditor cannot take anything of yours without first obtaining a money judgment against you in court.
Common examples of unsecured debts include credit cards, student loans, medical bills, lawyer fees, rent and utility payments, and health club memberships.
Although credit card debt is generally unsecured, it might be secured if you signed a security agreement when you got the card. Always read the terms and conditions carefully when you sign up for a new credit card, or when you agree to any loan.