The difference between secured and unsecured debts in Oklahoma bankruptcy is important. One of the most frustrating things about bankruptcy for clients is the use of terminology that they’re unfamiliar with. One of the most frequent questions we get is whats the difference between Secured and Unsecured Debts in Oklahoma Bankruptcy. As part of that question people also ask why does it matter anyway?
Secured Debt Oklahoma Bankruptcy:
Secured debt is the easiest to understand. To put it simply, secured debt is money that was borrowed to make a specific purchase. Its made with the understanding that the lender will have a claim on the item purchased. For instance, if you go to your bank and borrow $20,000 to buy a new car, the bank gets a “security interest” in the car. If you stop paying the bank, they can take the car in order to recoup their losses. The same goes for things like mortgages and home equity loans. You are giving security in the item in exchange for the money. This also includes what are called “purchase money security interests.”
These are basically the same as the auto or mortgage loans, but on a smaller scale. An example is, if you take out a $2,000 line of credit at a furniture store, or take out a line of credit at a place like Conn’s to buy a TV. These are important because often, the property involved in a secured debt is exactly the property that clients want to keep. Fortunately, they can keep the property by keeping the secured loan, through a reaffirmation agreement. Secured debts can be discharged in bankruptcy, but the creditor gets the property.
Unsecured Debt in Oklahoma Bankruptcy:
Unsecured debts are basically everything else. Medical bills, credit cards, payday loans, money borrowed from a friend, judgments, repossessions, and many others are all unsecured. Essentially, if there isn’t some kind of personal or real property attached to the debt, it is unsecured. With a few exceptions, specifically, child support, back taxes, and student loans, unsecured debts can be discharged in bankruptcy.
Finally, we are occasionally asked about “priority” debts. Priority debts are a special type of unsecured debt that is supposed to be paid back before any other unsecured debt. They have priority over the other unsecured creditors. Priority debts are usually debts owed to the government, like back taxes or past due child support. In most bankruptcies, this is a meaningless distinction, because none of the unsecured creditors will be paid back. In cases where creditors will be paid like a Chapter 13, or a Chapter 7 Tulsa bankruptcy where assets will be distributed, the priority creditors get paid in full before any other unsecured creditors.
Tulsa Bankruptcy Forgives Secured and Unsecured Debt:
In conclusion, the difference between secured and unsecured debts boils down to whether or not property is attached to the debt. Priority debts are a special form of unsecured debts but are of no concern to the large majority of bankruptcy cases. Secured and Unsecured Debts in Oklahoma Bankruptcy are both forgiven. If you are concerned about which of your debts are secured or unsecured, contact our South Tulsa Bankruptcy Lawyers Law Office today.