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What is Secured Property?

If you are considering filing for bankruptcy, one of the first things you must do is divide your debt into two categories:  that which is secured and that which is unsecured.  This is very important in determining the best type of bankruptcy for your needs.  If you have a great deal of secured property, you may wish to consider a Chapter 13 bankruptcy rather than a Chapter 7.  In fact, you may be required to file Chapter 13, depending on the amount of your assets and income.

What Does “Secured Property” Mean?

Most lenders make two different types of loans:  those that are secured by an asset, such as a home or a car, and those that are unsecured by any tangible asset.  These are known as “unsecured loans” or “unsecured debt”; a good example is credit card debt.  Even though you may use your credit card to purchase tangible objects, it is highly unlikely that your credit card company would try to repossess those items to pay off your debt.  In fact, in most cases, it would be impossible. Secured debt, however, means that the debt is secured by something that could feasibly be taken away from the debtor and sold to pay at least part of the balance of the loan.  Secured debts are usually home and car loans, although a debt tied to a specific purchase could be considered secured if the item could be repossessed and sold.

How Does My Secured to Unsecured Debt Ratio Affect My Bankruptcy?

It is important to know how much of your debt is secured and how much is unsecured.  By dividing your debt into these two categories, your bankruptcy attorney can help you decide which type of bankruptcy is right for you. Generally speaking, a Chapter 7 bankruptcy is better for someone with limited income and little secured debt, while a Chapter 13 bankruptcy is more appropriate for someone with a greater number of assets that are secured by loans.  However, this is a very general approach to deciding which bankruptcy is right for you.  There are many other factors that affect this important decision, so it is critical to receive sound legal advice before choosing a bankruptcy chapter. The bankruptcy attorneys at Oswalt Law Group in Phoenix are ready to help you determine the best type of bankruptcy to fit your needs.  Call today for a consultation about your case.  

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