However, Chapter 7 affects your secured debt differently. Although it can relieve you of your personal liability for the debt, it does not affect your creditor’s right to retake the collateral. Because of this fact, if you would like to keep the collateral in Chapter 7, it is necessary to stay current on the payments. However, if you do not want the collateral, Chapter 7 can protect you from being sued for the deficiency.
If you file Chapter 13, on the other hand, both debt types become part of the repayment plan. Under the plan, you repay your debts in monthly installments over three to five years. However, the plan only requires you to pay your unsecured creditors the amount they would have received in Chapter 7. Since most unsecured creditors receive nothing in Chapter 7, you do not need to fully repay most unsecured debts in Chapter 13. Because of this fact, most unsecured debts end up discharged after only pennies on the dollar (if even that much) are paid towards them.
With regard to secured debt, Chapter 13 can give you the help you require to become current. Filing Chapter 13 does not discharge your secured debt. However, it does give you three to five years to catch up on your secured debts. While you are making payments, you can keep the collateral. Also, your creditors may not repossess the collateral during this time. When Chapter 13 ends, you are current on your secured debts and resume making your regular payments toward them, assuming that you have not paid them off by this time.
Although these rules may seem simple, in reality there are many exceptions. If you are struggling with debt, you are well advised to consult with an experienced bankruptcy attorney. The attorneys at Minnillo Law Group Co., LPA can give you a detailed analysis of how bankruptcy would affect your unique situation and offer guidance on how to proceed.