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Mortgage

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.

The Advantages and Disadvantages of Filing for Bankruptcy

When faced with a mountain of debt, failing to make payments on time, you might think about filing for bankruptcy. Filing for bankruptcy can affect your finances for many years to come. However, for many people, it is a good idea because filing provides some benefits. Before you decide to file for bankruptcy, take a look at some of the pros and cons of filing. This would help you determine whether it makes sense to file or not.

Advantages of Filing for Bankruptcy

·         An Automatic Stay

Once you file for bankruptcy, the court will issue an automatic stay that would prevent creditors from pursuing any debt collection activity. This doesn’t cancel your debt, but it suspends all debt collection proceedings from creditors until the stay lifts or the case completes. You won’t get any letters or calls from collectors and won’t have to worry about wage garnishments, property repossessions, home mortgage foreclosures, and lawsuits on your debts.

·         Help You Keep Your Car or House

If you have fallen behind on your car or home loan payment and are afraid that you would lose the property, then filing for bankruptcy would stop a repossession or foreclosure. Chapter 7 bankruptcy won’t allow you to catch up on the payments; however, filing for Chapter 13 bankruptcy would help you make the payments through a repayment plan.

·         The Discharge

If you file for Chapter 7 bankruptcy, all your debts would get discharged, and you won’t have to worry about creditor harassment. If you don’t want to remove debt and can afford to make payments but need some relief in the repayment schedule, you can file for Chapter 13 bankruptcy.

Disadvantages of Filing for Bankruptcy

·         Effect on Credit

This is one of the major drawbacks of filing for bankruptcy. Bankruptcy filings remain on the credit report of the individual for ten years. However, the obligation to repay debts is erased as all debts are discharged through filing for bankruptcy. The effect of bankruptcy on credit can affect your ability to qualify for a loan in the future.

·         Some Property Loss

If you aren’t able to exempt all of your real estate or personal property under the exemptions of bankruptcy, the court may seize some of your property and sell it. The money would then be used to pay off creditors.

·         Issues with Opening a New Bank Account

The account you already have in different banks might not be closed after you file for bankruptcy. However, most banks won’t allow you to open a new account following the bankruptcy.

Final Thoughts

If you think that the advantages of bankruptcy outweigh its cons for you, you could consider filing for Chapter 7 or Chapter 13 bankruptcy.

Can You Get a Mortgage After Bankruptcy?

When a consumer is overwhelmed with debt and can’t find a way to pay their creditors, they often file for bankruptcy. Filing for bankruptcy can give you some relief from debts and stop collection activities such as repossession and lawsuits. However, bankruptcy can seriously hurt your credit and would stay on your credit report for a while. Does this mean that you can’t qualify for a mortgage after bankruptcy? No, this isn’t the case. Many lenders have established guidelines for consumers who emerge from bankruptcy and complete the waiting period. In this post, we will explain how you can get a mortgage after bankruptcy.

How Your Ability to Acquire a Mortgage Is Affected by Bankruptcy

Bankruptcy can lower your credit score and affect your ability to get loans. Fortunately, its impact doesn’t last forever. Before you can apply for a mortgage, your bankruptcy should be discharged. The court orders a bankruptcy discharge, and it eliminates your debts. The lender will want to see that your bankruptcy is discharged, and they will also look at your credit to determine whether you can qualify. There is also a waiting period that must be completed before applying for a home loan after bankruptcy. This period varies depending on the type of home loan you are applying for.

Waiting Periods

Waiting periods start once the bankruptcy is dismissed or discharged, meaning that the case is over, and you will be paying your debs without a bankruptcy payment plan. For Chapter 7 Bankruptcy, the waiting period is calculated from the dismissal or discharge date of the bankruptcy case. For Chapter 13 Bankruptcy, the waiting period for bankruptcy that is discharged isn’t the same as the bankruptcy that was dismissed.

Chapter 7 bankruptcy is removed 10 years after the date of filing, while Chapter 13 bankruptcy is removed seven years after the filing date. Credit reporting agencies normally delete bankruptcy from the consumer’s credit report after 10 or 7 years. However, it is still a good idea to check your report to ensure that there is no bankruptcy on it.

Waiting Periods of Different Home Loans

For Chapter 7 bankruptcy, the waiting period of conventional loans is 4 years, FHA loans’ waiting period is 2 years, that of the USDA loans is 3 years, and VA requires consumers to wait 2 years after the discharge or dismissal date.

For Chapter 13 bankruptcy, conventional loans’ waiting period is 2 years from the discharge date and 4 years from the dismissal date. FHA loans, USDA loans, and VA loans require consumers to wait at least a year after the discharge or dismissal date.

Final Thoughts

Getting a mortgage after bankruptcy isn’t an easy feat. But, if you are discharged from bankruptcy, wait for the required period and develop a good credit after bankruptcy, you may still be able to get a home loan.

Get A Fresh Start

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