For those unfamiliar with the Chapter 7 bankruptcy proceedings, a bankruptcy discharge is the official decision by the judge to forgive the debt you included on your bankruptcy petition. It’s basically the successful completion of your bankruptcy. Now, this doesn’t mean that all your debt is wiped out – only the unsecured debt that you were able to include on your petition. Have hope, though, because for most people, the debt they carry is unsecured, so a majority of their debts are eliminated through a Chapter 7 discharge.
Debts in a Chapter 7 Bankruptcy Discharge in Centennial: What is Unsecured Debt?
Unsecured debt is debt that isn’t attached to some kind of property. If you do not make payments on an unsecured debt, the creditor cannot take any property away from you. For example, if you default on a car payment, the bank can take your car away. This means it is a secured loan and not eligible to be included on your Chapter 7 bankruptcy petition. On the other hand, if you stop making payments on your credit card debt, the credit card company cannot take the items you bought using the card. There is no collateral involved with unsecured debts. Common unsecured debts include:
Credit card debt
Cell phone bills
Any other personal loans without collateral
What Happens to My Secured Debts During and After a Chapter 7 Bankruptcy Discharge?
There are two ways secured debts can be handled during a Chapter 7 bankruptcy. The first is that you can give up the property associated with the secured loan. When you give up the property, you can then include the debt in your Chapter 7 bankruptcy. The second is that you can continue to make payments on the loan, which will preserve your ability to keep the property. This is actually many people are able to do because they are no longer splitting their income amongst all their debts. Because they are in the process of having their other debts discharged, thy have the ability to make payments on their car or home, allowing them to keep the property.