Secured Debt: is debt which attached to a particular
piece of personal or real property. Most typically: homes, cars,
household furnishings which have been purchased on installment
payments. This type of debt is completely wiped out in the bankruptcy
if the debtor chooses to surrender the property back to the creditor.
If the debtor chooses to keep the item of property, all that the
debtor needs to do is to agree [ in a written reaffirmation
agreement ] to continue to pay the installments payments as they
come due, or buy the item for its current market value in lump
sum cash [redemption]. Any debt over the cash market value
of the item is considered unsecured and is discharged as any other
unsecured debt in the bankruptcy.
Unsecured debt: is debt which is not attached to any property.
It is debt which is backed only by the debtor's promise to pay.
This is debt completely wiped out in a bankruptcy.
How do I keep my personal possessions?: In the bankruptcy
code, there are exemptions. These exemptions are property
which the debtor is allowed to keep. Here is a partial list of
exempt property which the debtor can protect:
equity in your home up to :
$50,000 for a single individual
$75,000 for a married couple
$100,000 for over 65 or disabled
Your automobiles, furniture, pension plans, jewelry, clothing,
and much more
Automatic stay: This is a provision of the bankruptcy code
which stops all legal actions against a debtor. The automatic
stay stops foreclosure, law suits, evictions, garnishment of wages,
repossessions, and more.
Chapter 7, straight bankruptcy: This is the chapter of
bankruptcy which wipes out all unsecured debts, and all secured
debts upon which the debtor chooses to return the property that
secures the debt. This is the chapter of bankruptcy which most
people file because it is the simplest, cheapest, fastest and
does not require that the debtor qualify for it.
Chapter 13, reorganization [the wage earner plan]: This
is the chapter of bankruptcy which creates a payment plan whereby
the debtor can catch up on payments such as past due mortgage
payments and back taxes. This chapter requires that the debtor
qualify for the repayment plan. This is a much more complex bankruptcy
than chapter 7 and the case remains open for a much longer time
[until the repayment plan is completed].