Understanding Secured vs. Unsecured Debts

When deciding whether to file for bankruptcy with the help of contract dispute lawyers in Tampa, you should understand how your existing debts will be handled. Some debts are dischargeable in bankruptcy and some are not. Of the debts that are not, some are non-dischargeable by law and some may be determined non-dischargeable by the court. Speak with your contract dispute attorneys in Tampa to understand how your debts fall into these categories.
Debts can be either secured or unsecured. Unsecured debts are those that are not subject to a lien or encumbrance. Secured debts are those that have a lien or other collateral attached to the property. Because the creditor is legally entitled to the value of the lien, the creditor may be allowed to recover the property if its value is equal to less than the amount of the lien. If the property is worth more, then the excess value may be paid to the creditor according to the agreement between debtor and creditor.
If you are filing as an individual Chapter 7 or Chapter 13 debtor, the value of your secured personal property will be assessed to determine its replacement value (its value without costs of sale or marketing). For household or personal property such as furniture, this is determined by its retail price taking into account the property’s age and condition.
As an example, consider a furniture purchase of $3,000 on credit, with the furniture used to secure the debt. At the time of filing bankruptcy, the debtor still owes $2,000; however, the replacement value of the property would only be $1,000. The debtor will have the option of letting the creditor repossess the furniture, or paying $1,500 (the replacement value of the furniture). The remaining difference on the contract ($500) becomes an unsecured debt that may be discharged during the bankruptcy proceedings.
By contrast, if the furniture were worth more than the claim, the creditor would be allowed to repossess the furniture and use the excess value toward the costs of managing the claim such as interest or fees under the agreement.

Contact Contract Dispute Lawyers in Tampa

Make sure you understand what is involved in filing for bankruptcy by talking to our contract dispute lawyers in Tampa. Call Robert Savage at 813-200-0013.

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