What Are The Different Types Of Claims In Bankruptcy?

There are 3 basic types of claims in Bankruptcy for folks:

  1. Secured claims;
  2. Priority claims; and
  3. 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

  1. Most (but not all income taxes);
  2. Payroll taxes;
  3. Child support and Alimony;
  4. 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.

  1. The most common claims include credit card, pay day loans, utility bills, and medical bills.
  2. 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.
  3. 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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