If you're in severe financial straits, you're probably looking into all kinds of options to get out of your financial problems. However, many people refuse to consider the possibility of bankruptcy out of embarrassment or simply because of misconceptions about the bankruptcy code. One of the biggest questions people have is what happens to their unsecured bankruptcy debts.
What exactly do you mean by this? Well, many of your financial obligations such as credit card bills are considered unsecured debts because you did not have to put up any collateral as a security in case you did not pay your bill. The problem from the credit card company's perspective is that they are left with the unpaid debt after Chapter 7 bankruptcy. So what exactly can they do about this?
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Well, in most states your house and car are protected up to a certain dollar value from these types of unsecured debts. For example, Texas and Florida have unlimited homestead exemptions. This means that your house cannot be taken away nor can a creditor force you to sell your house in order to pay your credit card bills or similar obligations.
In states with unlimited exemptions, it doesn't matter how much your primary place of residence is worth. That means you get to keep your house, assuming that you continue making your mortgage payments because the lien holder (in this case the bank mortgage company) still has a right to take your house through foreclosure.
However, creditors dealing with unsecured debts don't have much of a recourse when it comes to making you pay during bankruptcy. If you have a lot of valuable items lying around the house, then the bankruptcy court might force you to liquidate some of them. Your lawyer can help you with the details so you can understand exactly what you would or would not lose. However, in most cases families declaring bankruptcy do not own many nonexempt assets to speak.
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