What is the Difference Between Secured Debt and Unsecured Debt?

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Knowing the difference between these two debts can be extremely useful in determining which type of bankruptcy will work best for you. In order to file a Chapter 7 bankruptcy, you must be current on all house and car payments in order to keep them. A Chapter 7 bankruptcy will wipe out any unsecured debt. A Chapter 13 bankruptcy, on the other hand, is what’s known as a repayment plan.

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What is the Means Test in Bankruptcy?

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With major changes in the bankruptcy laws in 2005, you are required to undergo a “means test.” Simply put, your household’s income for the six months prior to filing bankruptcy (your income, your spouse’s income and any contribution to your household from others) is annualized and compared to the Census Bureau’s median income for the same size household within your state.

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