Chapter 7 Bankruptcy Debts

If you have been considering filing bankruptcy, you probably already know that there are two types of personal bankruptcy: Chapter 7 and Chapter 13. And you may know that Chapter 7 bankruptcy is referred to as a liquidation because some of your property that is not exempt may be sold to pay on your debts. But you want to know: "What are Chapter 7 bankruptcy debts?" Just what debts are covered?

Basically, a Chapter 7 bankruptcy is designed to help you dispose of (discharge) unsecured debts such as credit cards, personal loans, medical bills, etc.

There are two types of debts: secured and unsecured.

Secured debts are debts where, if not paid, the lender or creditor can seek to obtain possession of certain property or to have the property sold in order to pay the debt. The secured debt can be voluntary such as a car loan or a house loan (mortgage). Or the secured debt can be involuntary such as a judgment lien. Depending on a given situation, if a judgment is not paid, the judgment holder can seek to have property sold to pay the judgment. Also, with secured debts, voluntary and involuntary, the debts must be paid before the property may be sold free and clear.

In a Chapter 7 bankruptcy, secured debts are not discharged. If you have a car loan or house loan and you want to keep your car or house, you must continue to pay the debts.

Unsecured debts are debts which, if not paid, the lender or creditor can only sue to enforce. In other words, if an unsecured debt like a credit card is not paid, the lender or creditor cannot obtain possession of property. The lender or creditor can only file a legal action to claim the money due.

In a Chapter 7 bankruptcy, your unsecured debts such as credit cards, personal loans, medical bills, etc. are discharged. This means that the lender or creditor cannot file a legal action to collect. In other words, you do not have to pay the unsecured debts. Note, under certain conditions, such as fraud, some unsecured debts may not be discharged in bankruptcy even though they are normally discharged.

By law, certain other debts, even though they are unsecured, are not discharged when filing bankruptcy. These include, but are not limited to, debts for alimony and child support, debts for certain educational benefit overpayment or loans made or guaranteed by a governmental unit, debts for certain taxes, debts for willful and malicious injury by the debtor to another person or to the property, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated, and debts for money or property obtained by the debtor by fraud or by false pretenses.

This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

For more general information, see Bankruptcy. For more detailed information see Chapter 7 bankruptcy.

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