Secured Debts

• Secured creditors have a lien on some form of collateral until the debtor pays off the debt. Mortgages and car loans are examples of secured debts. The debtor needs to be current with those loan payments if he wants to keep the collateral in a Chapter 7 case. If the debtor wants to retain the property, the creditor usually requires the debtor to sign a reaffirmation agreement. The agreement lists the terms of the loan and the debtor affirms his ability to continue making payments. Reaffirmed debts are not discharged in a bankruptcy. Consult with a bankruptcy attorney to confirm the long-term consequences of retaining property and signing a reaffirmation agreement. If the debtor is delinquent with payments when the case is filed, the creditor can request permission from the court to repossess the property.
  
  

Unsecured Priority Debts

• Unsecured priority claims are the types of debts that must be paid in spite of the bankruptcy filing. These debts include certain types of taxes, child support and personal injury claims caused by the debtor operating a vehicle while intoxicated. The debtor remains personally liable for these debts. The debtor needs to keep making payments to those creditors for the outstanding balance after the bankruptcy case is discharged and closed.
  
  

Student Loans

• The cost of matriculating college and graduate schools can be very expensive. Once students have obtained their degrees, they realize the crippling effect those student loans have on their budget and the ability to cover living expenses. The bankruptcy code makes it extremely difficult to get rid of student loan debt. The debtor must prove that the student loans pose an undue hardship that causes the debtor to barely maintain a minimal standard of living. The debtor must also show that his financial circumstances will not change in the future during the remaining repayment period. Discuss the possibility of qualifying for an undue hardship discharge with a bankruptcy attorney.
  
  

Unsecured Non-priority Debts

• Claims submitted to the bankruptcy court by credit card companies, medical care facilities and payday loan companies usually fit within the category of unsecured non-priority debts. Unsecured debts are not attached to any of the debtor's property. These are the kinds of debts that are usually discharged with the creditors receiving very little to no payout in the bankruptcy. When the case is discharged, those creditors do not have the right to request further payment and the debtor has an opportunity to receive a fresh start. Usually, by getting rid of these types of debts, the debtor is better able to manage his other living expenses.