Types of Creditor Claims in Bankruptcy
At The Sellers Law Firm when we prepare a Chapter 7 bankruptcy petition or Chapter 13 debt consolidation plan, we have to classify your debts into one of three different types of categories. Your debts are classified as a secured claim, unsecured claim, and a priority claim.
Our Montgomery bankruptcy lawyers’ first step is to examine whether a debt is a secured claim. A secured claim is a debt in which the creditor has a lien or a security interest in a piece of property that you own. If you promised an asset as collateral when you incur that debt, then you voluntarily give their creditor a lien in your property. This is commonly referred to as a voluntary lien. The most common examples of secured claims are mortgages, car loans, and tax liens when the government has not been paid and they have placed a lien on your property and recorded it at the probate office in the county in which the property is located.
However, creditors can obtain involuntary liens against your property. An example of an involuntary lien would be when an unsecured creditor sues you and wins. The court orders a judgement against you, and once the unsecured creditor has the judgment and files it in the probate court in the county in which you live, then this debt become secured. In many instances these secured judgments are actually still unsecured debt because the debtor may not have any property in which the Judgment yay attach.
When you receive a bankruptcy discharge it does not automatically eliminate the lien on your property. In other words if you have a secured obligation your lender can still enforce the lien by foreclosing on your property or repossessing it after your bankruptcy is filed unless you continue to make timely payments to the creditor. If you file a Chapter 13 debt consolidation plan you would normally include most secured claims in that plan and pay them over a period of three to five years through the Chapter 13 plan. However if you have a judgement lien that impairs your bankruptcy exemptions, then you may be able to wipe it out wholly because all of your property is exempt.
Your most common claims will be unsecured claims. This is a creditor that does not have a lien against your property. A Chapter 7 bankruptcy will eliminate all of your unsecured claims, and a Chapter 13 debt consolidation will generally eliminate all or most of your unsecured claims. The most common types of unsecured claims that we see are credit card debt, medical bills, personal loans, payday loans, and collection accounts. Normally, our Chapter 13 clients do not repay any of their unsecured debt. A student loan is an exception to the unsecured debt rule because it is very difficult to eliminate a student loan debt. (For more information please see our web page on this subject).
Finally the third type of claim that we see is priority claims. Priority claims are not dischargeable and receive special treatment in a Chapter 7 bankruptcy and Chapter 13 debt consolidation plans. Priority creditors will get paid before any other creditors in a Chapter 7 or Chapter 13 and their claims may survive your bankruptcy discharge. The most common types of priority claims in bankruptcy case are alimony, child support, and certain tax obligations that you may owe to the state or federal government. We are generally able to work with the creditors who hold priority claims so that you may proceed with a Chapter 7 bankruptcy or Chapter 13 debt consolidation plan. Just because you have priority claims this should not deter you from seeking the help of a bankruptcy attorney.
Our Montgomery bankruptcy attorneys are skilled in determining what types of debts that you have. Call us to discuss your options before making any financial decisions. All consultations are always free, and we can usually see you within 24 hours. Call us at 334-LAWYERS (529-9377) to set an appointment to meet with us. You may also reach us by using the “text us” link or Contact Form on our website. Remember that doing nothing, changing nothing so call today!