There are 3 basic types of claims in Bankruptcy for folks:
- Secured claims;
- Priority claims; and
- General unsecured claims.
SECURED CLAIMS
A secured claim is one where the creditor has a lien on a property in your possession. A secured claim can be by agreement; by law; or by recording a lien.
By agreement. The most common types include mortgages, cars, and even furniture. The individual agrees that the creditor has a lien on certain property as well as on the note. By law. This would include real estate taxes. By recording. Creditors who get a money judgment can record this judgment as a lien. Also, the IRS records taxes that are due.While the debt for a Secured Claim can be discharged in Chapter 7 the lien remains.
PRIORITY CLAIMS
A priority claim is not discharged in Bankruptcy unless paid. The most common for individuals
- Most (but not all income taxes);
- Payroll taxes;
- Child support and Alimony;
- There are some others but rare in Consumer cases.
GENERAL UNSECURED CLAIMS
While claims that are neither secured nor Priority claims there are some distinctions.
- The most common claims include credit card, pay day loans, utility bills, and medical bills.
- Some secured claims can become unsecured claims if the property is gone.
- A deficiency judgment after the foreclosure sale;
- A deficiency when an automobile is sold by the creditor;
- A judgment lien that is avoided in a bankruptcy case.
- Certain Unsecured claims are not discharge in bankruptcy, such as
- Student loans;
- Parking and red light tickets. These debts are not discharged in Chapter 7 but can be in Chapter 13. The city of Chicago does have a program where parking and red light tickets can be waived in a Chapter 7.
- Any ticket where a police offer stops a motorist and issues a ticket.
- Illinois Tollway debts. These debts are not discharged in Chapter 7 but can be in Chapter 13.
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