When someone struggles with a lot of financial hardship, bankruptcy can be a powerful tool that can give a person control over their finances or even eliminate their debt troubles. Despite all of the benefits that bankruptcy has to offer, people do not know all of the facts they should know about this financial option.
More than 500,000 people apply for bankruptcy every year. Despite how many people apply for bankruptcy every year, many are still surprised to learn that bankruptcy does not eliminate all types of debt. So, what kind of dead can bankruptcy discharge?
Types of debt and their differences
Consumer debt typically falls into one of two different types of categories: unsecured debt and secured debt. Secured debt is a type of debt that attaches some form of collateral to the financial loan. Common forms of secured debt include mortgages and car loans. Student loans are also a type of secured debt.
Unsecured debt is consumer debt that does not have collateral attached to it. This form of debt is far more common and consists of types of debt like medical debt, credit card debt, and unpaid utility bills.
Chapter 7 and Chapter 13 bankruptcy only discharge unsecured debt. This means that if you apply for bankruptcy, you will likely be able to eliminate or manage your credit card debt, but you will still keep your student loan debt.
Some debt discharge is better than no debt discharge
Even though bankruptcy cannot eliminate all types of personal debt, it can still be a major benefit to you. In as little as a few weeks, bankruptcy can allow you to stop worrying about next month’s bills, and let you start focusing on your future.
Don’t let debt take control of your life. If you are struggling with considerable amounts of personal debt, consult with a bankruptcy attorney to confirm what type of bankruptcy would best benefit your needs, and what you can do to take back control over your finances.