Even with a strong economy, many people in Mississippi continue to experience serious financial pressures. As the holiday shopping season has now passed, now may be the time you decide to sit and take stock of your debt inventory. If you believe that filing for bankruptcy may be the best way for you to get the financial fresh start you are looking for, you will want to learn about the different types of debt and how that may direct what type of bankruptcy is best for you.
As explained by The Balance, debt can be classified in one of two ways. The first is referred to as secured debt. This means the amount of money you owe to a creditor is backed by something tangible like collateral. Two common examples of secured debt are home loan mortgages and auto loans. The other type of debt is unsecured. As the name implies, this type of debt is not associated with an actual asset. Two examples of this type of debt are credit card debt and medical bills.
In a Chapter 7 bankruptcy, a creditor may seize an asset in lieu of payment from you for a secured debt. This is why some people lose their homes or even their cars in a bankruptcy. In a Chapter 13 bankruptcy, there is no seizure of assets as this type of plan is a structured repayment of your debt.
This information is not intended to provide legal advice but is instead meant to help residents in Mississippi understand the different types of debt so that they may be better able to select the type of bankruptcy that is most appropriate for their debt-relief needs.