How Your Secured Debts Are Treated

If you've pledged property as collateral for a loan, the loan is called a secured debt. The most common examples of collateral are houses and automobiles. If you're behind on your payments, the creditor can ask to have the automatic stay lifted in order to repossess or foreclose on the property. However, if you are current on your payments, you can keep the property and keep making payments as before -- unless you have enough equity in the property to justify its sale by the trustee.

The Bankruptcy Discharge

At the end of the bankruptcy process, all of your debts are wiped out (discharged) by the court, except:

• debts that automatically survive bankruptcy, unless the court rules otherwise (for example, child support, most tax debts, and student loans), and
• debts that the court has declared nondischargeable because the creditor objected (for example, debts incurred by your fraud or malicious acts).

After Bankruptcy

Once you receive your bankruptcy discharge, you no longer legally owe your creditors for any discharged debts. You can resume your economic life without court supervision, except you must tell the court if you receive (or become eligible to receive) an inheritance, insurance proceeds, or proceeds from a divorce settlement within 180 days of the date you originally filed your papers.

You can start rebuilding your credit, but it will take several years before you can get decent interest rates on a credit card, mortgage, or car loan. You can't file for Chapter 7 bankruptcy again for another eight years from the date of your filing.