Filing for Chapter 13 bankruptcy in Michigan is the first step on the road to restoring your finances and emerging from under a cloud of debt. If you are considering a Chapter 13 filing, you should know how your debts will be dealt with. As you go through Chapter 13, your debts will be organized into three different categories. How a debt is classified will determine whether you need to fully pay it back.
As explained by Forbes, the debts you have to pay off are classified as priority debts. These are the debts that cannot be forgiven and will have to be paid off no matter how your bankruptcy unfolds. Child support, for instance, cannot be waived as part of a bankruptcy. Many outstanding taxes remain obligatory. Student loans also generally fall into this category.
The next category is secured debt. These are the debts that are secured by collateral, such as a home or an automobile. When people are unable to make their scheduled payments, the creditor has the authority to repossess the vehicle, home, or whatever asset is considered collateral. Under Chapter 13, you are given relief from repossession and are allowed to work out a plan to pay off these unsecured debts, including outstanding amounts.
Unsecured debt is debt that has no collateral backing. This is the kind of debt that is most likely to be waived in some capacity. These debts typically include debts on credit cards or medical bills. You may still be required to pay a portion of these debts, subject to the determination of the court of how much you are able to pay given your circumstances, or some debts may be fully forgiven.
The debt needs of people considering a Chapter 13 bankruptcy are going to vary. For this reason, only read this basic guide to bankruptcy debt as general information and not as a substitute for the legal advice a bankruptcy attorney can provide.
