Understanding your Debts
In bankruptcy, debts are divided into two classes: secured debts and unsecured debts. A secured debt is one where you have pledged certain property as security for payment, such as with a mortgage or auto loan. It is associated with the creditor having a lien on the property. An unsecured debt is not connected with any particular property, such as credit card debt and medical bills.
Debts are also divided into dischargeable debts (which are eliminated by bankruptcy) and nondischargeable debts (which are still owed after bankruptcy). Most consumer debts are dischargeable. Nondischargeable debts are most taxes, child support, and student loans.
All of your debts must be listed and all of them will be included in the bankruptcy. We will need the most accurate addresses that you have available for all of your creditors. This includes family members and landlords.
After listing there is not much to be done for unsecured debts. However, secured debts need additional work.
You will need to indicate how you plan to deal with your secured debts. Your choices are:
- Keep up your existing payments.
- Redeem the property, which means pay the creditor the replacement value of the property.
- Reaffirm the debt, which means reach a new payment arrangement with the creditor.
- Surrender the property, which means allow the creditor to take the property.