How Unsecured Debts Affect Your Bankruptcy Filing

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When you file for Chapter 7 bankruptcy, you will be asked to list all of your secured debts and unsecured debts. The reason is so that the bankruptcy trustee can inform the judge as to whether any properties of yours can be sold to reimburse your creditors.

Normally, the creditor can repossess property if it is a secured property. A bankruptcy filing will usually delay the repossession, but not stop it. If the property is unsecured, however, the creditor is not entitled to take possession of the property. So, prior to the judge ruling on your bankruptcy request, you and your trustee will have to present him with the document that lists all of your secured and unsecured debts.

Most debts that people have will fall into the unsecured category. For example, the biggest unsecured item on most peoples list who file for bankruptcy is credit card bills. The number of credit cards that people have in their possession has virtually exploded in the last twenty years. Helping to push this explosion is the practice of millions of people borrowing and charging items to their cards way beyond their means.

Now, in the past couple of years, as hundreds of thousands of jobs have disappeared from the work force, a number of people have found themselves in a position where there is simply no way that they can repay the credit card amounts that they owe. It is situations like this that is forcing many consumers to file for bankruptcy.

Medical bills is, by far, the second largest type of unsecured debt that many people filing for bankruptcy have. Especially for those who have no health insurance. And millions more, even though they have health insurance, are seriously underinsured.

When a catastrophic illness such as cancer strikes a family in this situation, the medical bills that pile up can easily wipe them out financially. By the time they have refinanced their home and charged their credit cards to the max to pay for medical treatments, they have nothing left. Many times, when this happens, they have no other choice than to file for bankruptcy.

Other common unsecured debts are things such as alimony, child support, loans from relatives and friends, and utility bills such as your phone, gas, or electrical bill. The court will rank your unsecured debts in orders of importance. For example, an unpaid tax debt will be given precedence over a gas bill. Child support will be given precedence over something like back rent.

The good thing, for the family, is that in most cases these unsecured debts will be the ones wiped out by the bankruptcy enabling the family to start over again.

Article Source: http://depositarticles.com/

David Hoyer is a freelance writer who writes articles relating to kinds of bankruptcy and filing bankruptcy and other financial issues. Visit his site for more informative articles.

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