When someone is experiencing considerable financial debt, bankruptcy may be the best option for them to recover from debt. While bankruptcy may be the right choice for many, it does not eliminate or manage all debt. There are two forms of debt: secured and unsecured.
Bankruptcy only eliminates unsecured debt, meaning someone who files for bankruptcy will not be ultimately debt free after their discharge of debt. Even though bankruptcy does not discharge all debt, it is still a viable option for many people. In 2019, more than 750,000 people filed for bankruptcy. SO what kind of debt can bankruptcy eliminate?
Unsecured debt does not have any collateral, or security, attached to it. Without bankruptcy, if a borrower could not pay the debt, the lender would need to file a lawsuit to collect their losses. Popular examples of unsecured debt are:
- Credit card debt
- Medical debt
- Utility bills
- Unsecured personal loans
If a person receives approval for Chapter 7 bankruptcy, these kinds of debt will vanish by the end of the process. The secured debts, however, would stick around.
Secured debt is a form of debt that has collateral. The most common examples of these debts include car loans and home loans. If there is property attached to a loan, there is a good chance for it to be a secure loan. In addition to these types of debts, tax debts and student loan debts will persist through bankruptcy.
Manage your future
Bankruptcy has the potential to be an excellent resource to overcome massive financial debt. While it cannot discharge all debts, it can be enough to let you regain control of your future.