Generally a bankruptcy will discharge all unsecured debt but it will not discharge secured debt on property you intend to keep.
Bankruptcy was designed to help everyday people get a fresh start from their debts. However, not all debt is created equally. Debt generally comes in two different forms, secured debt, and unsecured debt. Generally, a bankruptcy will discharge all unsecured debt but it will not discharge secured debt on the property you intend to keep. Depending on the type of debt you have, bankruptcy can be a great option to help you get back on your feet.
What Is Secured Debt: Secured debt is debt that is protected by an asset. The asset purchased, such as a home or vehicle, can is used as collateral in exchange for the loan. In this situation, the lender will hold the deed or title until the loan is fully paid. If you have a loan on your vehicle or a mortgage on your house, chances are that you have a secured loan.
- What will bankruptcy do to my secured debt? Bankruptcy can be very helpful for unsecured debts as we will see below, but what can bankruptcy do to a secured debt? Generally, you cannot discharge your secured debt through bankruptcy but you do have options. First, you need to make a decision as to whether you want to keep the property that is secured by the debt, or if you want to surrender it. If you decide to surrender your secured debt back to the creditor you are essentially "washing your hands" of the entire transaction. The creditor will come and take the secured property back and any deficit will become unsecured debt and the debt will be discharged through bankruptcy. If you decide you want to keep the property then you must pay for the secured debt. This is where an experienced attorney will be crucial to help navigate the repayment of the loan. Should you file a Chapter 7? Should you file a Chapter 13? Do you need to pay the full loan value to the bank or just the value of the vehicle? Do you need to pay at the interest rate on the loan or can you modify the interest? These are all very fact-specific questions that your attorney can help you answer.
What Is Unsecured Debt: Unsecured debt is the reverse of secured debt. It is debt that is not protected by an asset such as a house or vehicle. Some examples of unsecured debt are credit cards, personal loans, medical bills, etc. These debts generally have a much higher interest rate because the lender does not have the deed to your house or the title to your vehicle. The higher interest rate also makes these debts very difficult to repay and leaves our clients feeling trapped and overwhelmed.
- What will bankruptcy do to my unsecured debt? Bankruptcy can discharge unsecured debt which will give you a fresh start. Most unsecured debt is fully dischargeable which means you can get rid of it by filing bankruptcy. There are certain forms of unsecured debt like student loans and income taxes that are generally not dischargeable but a majority of our client's unsecured debt is dischargeable. In order to find out whether your unsecured debts are dischargeable reach out to our office today to learn more.
How Long Does It Take To File A Chapter 7 In Nebraska?
Several clients ask us how long it takes to file Bankruptcy in Nebraska. Each type of bankruptcy differs in their timeframes. A chapter 7 is the quickest bankruptcy and usually, the entire process takes about 3-4 months to complete. To get the process started a prospective client will contact our office for a free consultation that can be done in person or can be scheduled remotely on the phone. After the initial consultation with our Attorney, you will be asked to fill out a bankruptcy packet that includes a questionnaire and several tasks for you to complete such as credit counseling, getting your past 6 months of paystubs, and providing us with your past two years of tax returns. After we receive all of the required documents from you, we will begin preparing the bankruptcy papers to submit with the Court. This usually takes a couple of days to a week to complete depending on the complexity of your case and our current workload. Once everything is ready we will have you come to the Office to review and sign your documents and then we will submit them to the Court.
Once we file the Bankruptcy with the Court you will be given a 341 Meeting of Creditors date about 1-2 months in the future. This is a meeting where the Bankruptcy Trustee will ask you a few questions about your property and your completed Bankruptcy documents. Once that meeting is complete and with no other obstacles, you will receive a discharge about 3 to 4 weeks after. At this point, you will be done with your bankruptcy having successfully completed your journey to a fresh start.
How Long Does It Take To File A Chapter 13 In Nebraska?
A Chapter 13 takes a little more time than Chapter 7 because it includes all of the steps illustrated in a Chapter 7 but also includes a monthly payment for 36-60 months. Instead of being discharged 3 to 4 weeks after your 341 Meeting of Creditors, you will make monthly payments for a range of 36 - 60 months and then you will receive your discharge. A Chapter 13 is very dependent on each person's financial status at the time of filing for bankruptcy. We have been successful in getting payments as low as $85.00 per month but we would need to learn more about your situation in order to calculate your payment. Please contact our team today to set up a free consultation here.
Want to know more about the different types of bankruptcy? Take a look at our explanation here.
Want to learn more about secured vs unsecured debts? Take a look at our friends at Investopedia.