Bankruptcy is a powerful resource that thousands of Americans rely on to free them of financial hardship every year. There are a lot of misconceptions about what bankruptcy does, and what it gets rid of. Chapter 7 bankruptcy does not eliminate all forms of debt; despite this, it may still be the best option for you.
Bankruptcy can be an especially confusing process when you do not have the guidance of a bankruptcy attorney. One of the first things you should understand about Chapter 7 bankruptcy is that it can only discharge unsecured debt. So, what is unsecured debt?
The difference between secured and unsecured
All debt that a person has is either secured or unsecured. Common examples of secured debt include car loans and home loans. What makes them secure is that there is collateral attached (in this case, the car, and home).
Unsecured debt refers to debt that does not have any collateral attached. This is the kind of debt that Chapter 7 bankruptcy can eliminate. Some of the most notable forms of unsecured debt that Chapter 7 discharges are credit card debt, medical debt, and utility bill debt. Just because there is no collateral associated with this debt, it does not mean that a debt collector cannot recover their losses. Unsecured debt that remains unpaid by the debtor commonly winds up in court to settle.
Many people look towards Chapter 7 bankruptcy when disaster or illness strikes, and they are left with considerable medical debt. This option can help people earn a fresh start after suffering an unexpected financial burden.
What can bankruptcy do for you?
Everyone has their own unique situation with their finances, which means that bankruptcy may offer different results for them than other people. If you want to know more about how you can benefit from bankruptcy, contact an attorney to discuss your options and their results.