Chapter 7 can be used as Positive Tool

Video Transcribed: Bankruptcy Attorney Edward Kelley, 888-DEBTLINE still kicking here, coronavirus with the working in this ghost town of Oklahoma city. Anyway, I’m going to finish up very quickly our series on debts that you can knock right out and this will be the conclusion of that.

So we’ve already talked about credit cards, personal and signature loans, and medical bills as all being things that you can knock out. And those are good examples of what I’m talking about as a general category, unsecured debts.

So just to wrap this up, if a debt, you know when you go into bankruptcy, the biggest classification you’re going to worry about is, are we talking about unsecured or secured debt? Your car, your home, if you have a mortgage, your car, if you have a lien and note on the car, so to speak.

When you go into a bankruptcy, let’s take a car for example that’s worth 5,000 and you owe 10,000. So you can divide, bifurcate is the technical term, that debt into a 5,000 secured debt because that’s the actual value of the collateral in 5,000 unsecured. So the unsecured portion of the debt can be discharged.

Now maybe your car is not the best example. If you bought the car within 910 days before bankruptcy, you can’t really do that. That’s to stop people from buying a car and then filing bankruptcy to get rid of the rest of it. But in a bankruptcy you can either reaffirm that loan or redeem it.

So what that would mean is if you paid off the fair market value of the car, assuming you didn’t buy it with 910 days, you could keep it and any other remaining debt would be wiped away as an unsecured debt.

Or a 13, you could cram down if you didn’t buy it within 910 days and you’d only have to pay off the 5,000 in the plan instead of the 10,000 that you originally owed.

So again, the idea here is the collateral, which in the case of a car is only the value of the car, is a secured debt creditor is entitled to either the collateral of full payment of the secured portion of the claim, and the rest is unsecured, just like the credit card, signature loans, hospital bills, anything that doesn’t have collateral.

So unsecured in a 7 gone completely in one fell swoop, or in a 13 are only paid a percentage based on your disposable income. So that’s a whole lot of debts that you can knock right out in bankruptcy.

So that’s going to wrap it up. As always, you can reach me at 888-DEBTLINE or email me at Edward@wirthlaw.com or on Facebook at our Facebook group, Oklahomans for Debt Relief. Hope everybody’s staying safe out there.