Types of bankruptcy for Secured Debt

Many people today owing huge amounts of debts to secured or unsecured money lenders have gone hopeless and so they file for bankruptcy. But before filing for bankruptcy, one should know which type of bankruptcy will allow discharge from debts and offer protection. In cases of secured debts, filing for bankruptcy must be taken seriously.

In secured debts, initial collaterals are asked by creditors. This will give assurance to them that their investment will be returned in due time. When debtors file for bankruptcy, they will only be relieved from legal action responsibility and creditors will no longer run after them. But one must remember that debtors hold the collaterals and they have every right to take it away.

There are different types of bankruptcy and each type has its specific use. the two most common types is the chapter 7 and chapter 13 bankruptcy. Chapter7 bankruptcy, also called the straight bankruptcy allows the court to sell non-exempt assets of the debtor and pay it to the creditor and release the debtor from charges even if the amount is not enough for the total debt. Another type is the Chapter 13 bankruptcy which is called the wage earners plan. In this type, the debtors pay their total or some of the debts using their income in a specific period of time depending on the amount of debt.

The least used type of bankruptcy is the chapter 11 and 12 bankruptcy. The Chapter 11 bankruptcy is just similar to Chapter 13 but usually involves big companies so there are more requirements needed to file it. The other type is the Chapter 12 bankruptcy which is for family farmers only. Both types of debts are less used in filing for bankruptcy secured debts.

Therefore, Chapter 7 and chapter 13 is the types used in filing bankruptcy secured debt. Secured debts can take away anything from money lenders especially the collaterals. But when there is an available income source, creditors can take negotiations for payment terms. This is if the court allows it and both parties have agreed to fulfill their promise.

In order to know more on bankruptcy secured debts, legal attorneys are consulted. They can best guide debtors on which action to take in order to protect their assets.