Car Loan

Secured Claims vs. Unsecured Claim – The Difference Explained

A claim is a term used to describe the outstanding debt a person owes to a specific creditor. In bankruptcy, a creditor must file their claim first in order to receive payment. There are two types of claims that a creditor can file – secured and unsecured. The main difference between the two is that in the former the claim is guaranteed by collateral while the latter has no such guarantee. This blog will educate you on the further differences between the two claims and how their processes work in bankruptcy.

The Claim Process

Within a bankruptcy process, the court may send each of your creditors a deadline (called claim bar) to submit proof of their claim. In addition, in their claim form, they will have to fill out relevant information on their owed debt such as its type, outstanding amount, and whether it is secured or unsecured. Depending on which of the either two is checked by the creditor, the way your owed debt gets discharged may be processed differently.

Secured Claim

Since this type of claim is a debt that was secured by collateral (e.g. home, car, or another type of property), how the creditor is repaid is fairly straightforward. If the said property is non-exempt, the creditor can take ownership of it and attempt to sell it to repay themselves.

However, there are certain types of secured claims in which the said involved debt does not necessarily need to be tied to any collateral. One example is your tax debt, in which the IRS can take the approval of the court to sell your property to secure payment.

Unsecured Claim

Unsecured claims are usually filed on debts that were not tied to any collateral (e.g. your outstanding medical bills, credit card debt, etc.) As such, in a discharge process, the creditors are not allowed to take procession of your property themselves in an attempt to secure debt repayment.

Rather, your non-exempt assets are first taken over by the court trustee who sells them and uses the proceeds to repay the amount to the creditor(s). If you have multiple creditors with an unsecured claim, repayment is done in order of priority. Debts such as child support, money owed to employers, and rent are paid off first. Meanwhile, debts such as those on the credit card or loans from friends and family are paid last.

Get the Help of a Professional Bankruptcy Attorney

Filing for bankruptcy is a very important decision with some serious consequences. Taking the help of a legal expert can go a long way in ensuring that its outcome remains more in your favor. To schedule a free consultation with a bankruptcy attorney, call 512.640.3340, or book one directly online.

Can You Get a Car Loan After Bankruptcy?

Getting a Car Loan after Chapter 13 Bankruptcy or Chapter 7 Bankruptcy

Consumers can file for Chapter 13 and Chapter 7 bankruptcy. With a Chapter 13 bankruptcy, you get to keep your possessions and pay the debt through a three to five-year repayment plan. This plan is approved by the court and involves paying a fixed amount on a biweekly or monthly basis. Chapter 13 bankruptcy can stay on your credit report for a maximum of seven years. If you file for Chapter 7 bankruptcy, certain debts might be discharged while the remaining may be paid by liquidating your property and some of your possessions.

While a bankruptcy hurts your credit score, you can still get approved for a car loan. Here’s how you can get a loan for buying a car after bankruptcy.

·         Check Your Credit

Before you apply for a car loan, review your financial health by checking your credit report. Request a free copy of your credit report from Equifax, TransUnion, or Experian. While there isn’t any minimum credit score required for getting a car loan, you will have some difficulty getting approved by a certain lender if you have a low credit score.

·         Improve Your Credit

Once you have reviewed your credit report, take some time to rebuild your credit if it is low. This might help you get approved for an auto loan at a lower rate. To improve your credit after bankruptcy, get a secured credit card and pay all your bills on time.

·         Save Money for a Down Payment

A down payment can improve your chances of getting approved for an auto loan and may even lower your interest rate. There isn’t any specific amount that you should put towards the down payment for a car. However, if you want to secure low interest rates, try to put 20 percent down on the new car.

·         Search for the Best Offer

When you have rebuilt your credit, saved money for down payment, and are ready to buy a car, search for the best offer by contacting different lenders. Compare loan terms and rates from various lenders to find the ideal deal for your situation.

Final Thoughts

Getting a car loan after bankruptcy isn’t impossible. If you can improve your credit score and save enough money for a down payment, you should be able to secure an auto loan and get behind the wheel of a new car.

Get A Fresh Start

Schedule a time to speak with an expereinced Bankruptcy Attorney today!