Types of Debt
People who are drowning in debt rarely have just one loan or just one source of that debt. You may have been making your student loan and mortgage payments when you became injured and incurred medical debt. To stay afloat, you charged necessities on a credit card. On top of that, you may be struggling with child support payments or owe back taxes.
When creditors call to harass, it may not matter to you what kind of debt they’re calling about. However, the type of debt when projecting the outcome of filing bankruptcy and determining what kind of bankruptcy to file. Some debts cannot be discharged, some are easy to discharge, and some carry certain consequences to discharge.
Types of Debt in a Cincinnati Bankruptcy
If you are a Southern Ohio or Northern Kentucky resident considering seeking the protections offered by bankruptcy, an experienced Cincinnati bankruptcy lawyer can help you understand what different types of filings would mean for you and help you develop a plan.
Eric Steiden has helped thousands of people over his 25 years of experience find a lifeline out of indebtedness. No matter what kind of debt you have, the team at Steiden Law Offices can help you understand your situation. Call our lawyers today at to set up a free consultation.
Steiden Law Offices assists people with debt throughout the Cincinnati area in Ohio and Kentucky, including in Hamilton County, Boone County and Kenton County. We have offices in Cincinnati, Covington and Florence.
Information on Different Types of Debt
- When Type of Debt Matters in a Bankruptcy
- Priority Debts in a Bankruptcy
- Secured Debts in a Bankruptcy
- Bankruptcy and Unsecured Debt
The type of debt you have matters in any bankruptcy. However, it more directly factors in with a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, any property you own that does not meet an exemption under Ohio or Kentucky law is sold. This is called “liquidation.”
The proceeds are used to pay off debt, in a certain order. Any debts remaining are discharged unless there is a legal reason to keep them from being discharged. A discharge means the debt is erased. It is off the books and creditors are legally prohibited from pursuing collection.
Because of this order, the type of debt is important. Priority debts, like taxes owed, cannot be discharged and are paid first. Secured debts, where there is collateral, are second. Unsecured debts, like most medical debt, are last, and are usually discharged entirely.
In a Chapter 13 bankruptcy, the type of debt matters, but not as prominently. A Chapter 13 is called a “reorganization.” You submit a plan that the court must approve, under which you pay your creditors back as much as you can over three to five years. Your creditors must make at least as much as they would under any other type of bankruptcy, including Chapter 7.
Your bankruptcy lawyer will review all the debt you owe and advise you as to what kind of filing will be best for you.
Priority debts are paid first in a Chapter 7 bankruptcy. These debts are money that is owed that is designed under law as the important money owed.
Priority debt includes:
- Many taxes owed, including income taxes owed within three years before you filing for bankruptcy;
- Child support;
- Alimony and spousal maintenance;
- Wages to employees for up to $12,475 up to 180 days after filing for bankruptcy;
- Contributions to employee benefit plans for up to 180 days after filing; and
- Legal claims for death and personal injury in a lawsuit relating to a DUI.
For priority debts, a bankruptcy will not matter. You will still owe these debts. However, under a Chapter 13 bankruptcy, the amount you pay per month to these creditors will be controlled.
Secured debts are the second-most important debts in a bankruptcy, and are paid after all priority debts are paid. A secured debt is one in which the creditor has some sort of collateral. Collateral means the creditor has rights to your property if you do not pay, such as the right to repossess or foreclose.
Mortgages are a prominent example, as are auto loans or any type of title loan. In a Chapter 7 bankruptcy, the debt in a secured loan can be discharged, but the lien is not. Therefore, you may not owe money to a creditor, but the creditor can still foreclose on your home or repossess your car.
In a Chapter 13 bankruptcy, the filing will stop foreclosure and may ultimately prevent it.
Unsecured debt is debt where there is no collateral and no legal designation to make it priority debt, like credit card debt, many types of consumer debt and medical. In a Chapter 7 bankruptcy, unsecured debt is usually discharged entirely, because even if there are proceeds from a liquidation, they go first to priority and secured loans, leaving nothing to credit card companies and medical debt collectors.
An important distinction is student loans. While student loans are technically unsecured debt, Congress has passed laws preventing it from being discharged, including both private and subsidized loans.
Analyzing Your Debts for Ohio and Kentucky Bankruptcy Filings
The kind of debt you owe will determine the outcome of your bankruptcy filing. It’s important to understand your debt and know the outcome of your filing. Cincinnati bankruptcy lawyer Eric Steiden and the team at Steiden Law Offices can help you understand your debt and make the appropriate filing. Call us today at to schedule a free consultation.