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Differences between secured and unsecured bankruptcy debt

On Behalf of | Sep 1, 2022 | Chapter 7 Bankruptcy

When you are considering filing for bankruptcy, please know you are not alone. Many Americans find themselves in a difficult place with debt and rising living costs, and one of the most powerful solutions is personal bankruptcy. One important facet of bankruptcy to consider is what, if anything, will you owe if you file for bankruptcy? In this blog post, we will discuss one facet of bankruptcy debts: unsecured and secured debts.

Chapter 7 basics

Chapter 7 and Chapter 13 bankruptcy are the two most common types of personal bankruptcy filed in Florida. Chapter 7 offers powerful debt relief, where certain assets are used to pay creditors. If this intimidates you, remember that most of your personal assets are exempt and, in the end, most debts are discharged. Chapter 7 bankruptcy has income limitations, but if you qualify, it is a great tool to dig out from under oppressive debts. Bankruptcy law divides debts into two subcategories: secured and unsecured debts.

Secured versus unsecured debts

Secured debts are those that have collateral attached, such as physical property,  homes and cars. The creditor, like a mortgage lender in the case of a home, retains a secured debt because they can repossess the asset to recoup the debt, like the family home. It follows then, those unsecured debts, like medical debts, are those that do not have collateral as recourse for the creditor. Thankfully, medical creditors cannot repossess the procedures or objects given, like a replacement hip.

Chapter 7 bankruptcy asset exemptions

Chapter 7 bankruptcy does have important notes to discuss, such as a requirement to liquidate some personal assets. Florida exempts various assets from liquidation. Most notable among these are the homestead and public benefits exemptions that allow you to exclude certain assets and equity from bankruptcy proceedings. A Miami bankruptcy attorney can help answer specific questions and understands the financial pressure on your shoulders, if you find yourself drowning in debt. Many offer a free initial consultation.


Kingcade & Garcia | A Miami Law Firm