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Secured debts are connected to certain items of property
called collateral. If you don’t pay, the creditor is
entitled to take the property designated as the collateral.
Various business loans may give creditors a lien against intangible
aspects of the business, such as patents, trademarks or intellectual
property. Secured debt can't ever be fully discharged. Types
of secured debt.
Security Interests- Liens you agree to.
A security interest is a contract in which you specify
what collateral can be taken by the creditor if you default.
If you stop making mortgage payments, the bank can foreclose
and take possession of your house. This is usually a home,
motor vehicle, furniture, large appliances or computer.
Nonconsensual Liens- Liens created without your consent.
A creditor can, in some situations, get a lien on your property
without your consent. These secured debts are termed nonconsensual
liens. A creditor with a nonconsensual lien claims you
owe them money, and to secure payment they place a lien on
your property.
Unsecured debts have no collateral or the debt is
not backed by tangible assets. The creditor has nothing to
take if you don’t pay,
which leaves the creditor only one option, to sue you and
get a judgment for the money you owe. The creditor can go
after some of of your wages, deposit accounts and other property
that can be taken under your state’s laws to satisfy
the debt judgments.
Unsecured debts consist of:
- Accountants’ and lawyers’ bills
- Alimony and child support
- Church or synagogue dues
- Credit and charge card cash advances and purchases
- Gasoline and department store charges
- Health club dues
- Loans from friends and relatives
- Medical and dental bills
- Rent
- Student loans
- Union dues
- Utility bills
Priority debts are debts owed to creditors who can
take the strongest legal actions if you do not pay. It is
not the size of the debt you owe that makes it a priority.
It is how the creditors can recover money owed. You must handle
priority debts before you offer to repay any of your non-priority
debts.
Priority debts consist of:
- Outstanding mortgage payments
- Outstanding rent
- Income tax
- Court fines for traffic offenses
- Child support or alimony
- Utility debts
With priority debt it is unlikely for you to lose your home
or your essential goods. Remember, if you make no offers to
pay without explaining why, the creditors can sue you in court.
If you still fail to pay when the court has ordered it, the
creditors can take further action. They can obtain another
court order allowing them to repossess goods.
Non-priority debts consist of:
- Credit card and store card arrears
- Catalogue arrears
- Bank overdrafts and loans
- Benefits overpayments
- Money borrowed from family or friends
Administrative Debt is also a priority debt. It is
created when someone provides goods or services to your bankruptcy
estate. Fees generated by attorneys and other professionals
whose employment has been authorized by the court to represent
the bankruptcy estate.
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