Types Of Debt
People get in over their heads in debt for a number of reasons, including:
- Business slowdowns
- Medical crises
- Overextension of credit
Bankruptcy is a legal means of addressing overwhelming debt, but not all debts are "equal." If you are contemplating or considering bankruptcy for the purpose of debt relief, you should understand the nature of various types of debt and how each type will be treated in bankruptcy. Consider the following types of debt, for example:
Credit card debt: This is one of the most common types of debt that we see in the bankruptcies we handle at Edwin L Feld & Associates, LLC. You may have been driven to the brink of bankruptcy when credit card companies raised their interest rates or otherwise made it difficult or impossible for you to keep up with payments.
Medical bills: Hospitals and medical clinics can be very aggressive in their collection tactics. Bankruptcy may be your only option, especially if collectors are harassing you. Consult with an experienced bankruptcy law attorney to learn how to protect yourself from these collectors.
Mortgage debt: Nearly every American is familiar with the mortgage crisis that has transpired in our country in the last few years. Mortgage lenders aggressively marketed subprime financial products to borrowers who could least afford them. If you are behind on your mortgage payments and this is leading you to consider bankruptcy, talk to a lawyer as soon as possible. You may find that you can save your home through bankruptcy. You may also have already decided that you cannot afford to stay in the home and you wish to let it go.
Federal and state taxes: Depending upon the tax years owed and whether those taxes were filed timely, there is a possibility that these debts may be dischargeable in a Chapter 7 or compromised in a Chapter 13. In order for that possibility to exist the first thing to look at is whether the taxes owed were for a tax year ending three years prior to the filing of a bankruptcy. There are several additional factors to look at to make a determination as to dischargeability; however, if the taxes at issue were incurred within the three-year period prior to a bankruptcy filing, those taxes would clearly be nondischargeable and would have to be paid. Chapter 13 would be the tool used to take care of those taxes.
Real estate taxes: If you are required to pay these taxes directly where taxes are not escrowed through the mortgage company, and you have been unable to do so, your taxes can be sold and you can ultimately lose your home. Chapter 13 is designed to prevent this from happening to enable you to repay the delinquent taxes through a Chapter 13 plan.
Secured debt: A secured debt is one such as a home loan or car loan that is attached to some physical item that a lender can foreclose on or repossess. Secured debt generally has a higher priority in a Chapter 13 bankruptcy debt reorganization plan than unsecured debt.
Dischargeable debt: See our Web page entitled "Dischargeable Debt" for some of the most common types of debts that can be wiped out through Chapter 7 bankruptcy or at the conclusion of a Chapter 13 bankruptcy.
Contact An Illinois Bankruptcy Attorney
To schedule a free consultation at any of our convenient Chicago area office locations, contact us toll free at 888-645-4357. You may also contact us by email.