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5 Examples of Unsecured Debt and How Bankruptcy Will Affect Them

Bankruptcy can be the ideal option for people who are seeking a fresh financial start. Chapter 7 bankruptcy involves discharging your debts, which means you are relieved of your legal obligations to repay them. In bankruptcy proceedings, the court distinguishes between secured and unsecured debts. Secured debt is backed by property or a lien while unsecured debt is debt for which you do not have to pledge property as collateral.

The following are examples of unsecured debt and how they will be affected by bankruptcy:

major credit cards

  • Credit Cards. Most people have credit cards, which is why they are one of the most common forms of unsecured debt. Credit card debt is generally dischargeable through bankruptcy, but there may be exceptions. If you have debt that was obtained through fraud or maliciousness, however, the creditor can ask the court to find that the debt should not be discharged.
  • Student Loans. Educational loans that are government funded or guaranteed are rarely eligible for discharge through bankruptcy.
  • Medical Bills. If you have extensive medical bills from a hospital stay or lengthy recovery, you know that these expenses add up very quickly and the debt can be overwhelming. Fortunately, medical bills are generally dischargeable.
  • Support Payments. The Bankruptcy Code does not allow debts for spousal support, child support, or alimony to be discharged.
  • Utilities. Many people fall behind on utility payments when they are struggling with serious debt. The good news for you if you are in this situation is that past-due utilities will usually be discharged in bankruptcy.

Bankruptcy may be the best choice for you, but it is not a decision that you should make lightly. Bankruptcy law is complex, but a bankruptcy attorney can help you determine what is best in your case. At Cutler & Associates, Ltd., we have been focused on bankruptcy law since 1990. Call (847) 868-2265 today to schedule a consultation.

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