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The difference between secured and unsecured debt

There are many advantages to filing Chapter 13 bankruptcy for those who are able. However, filing for Chapter 13 bankruptcy in Tennessee means meeting certain eligibility requirements in regard to the debt that one owes, as well as the income that one earns. There are limits to the amounts of debt that one can owe and still qualify for Chapter 13 bankruptcy. Specifically, according to the United States Courts, one must owe less than $1,184,200 in secured debt and no more than $394,725 in unsecured debt.

Therefore, in order to gauge one’s eligibility for Chapter 13 bankruptcy, one must understand the difference between secured debt and unsecured debt. According to FindLaw, a secured debt is one in which the creditor has the right to take away a specific piece of property if the debt is not repaid. Secured debt includes mortgages and car loans because if the borrower falls behind on payments, the lender has the right to foreclose upon the home or repossess the car. 

Unsecured debt means that a creditor does not have the right to take away a specific piece of property in the event of nonpayment. Credit card debt is an example of unsecured debt because even if the cardholder fails to make payments, the credit card company does not have the right to take away specific items that the cardholder purchased with the card. 

However, there is more to Chapter 13 eligibility than the amount of debt one owes. Chapter 13 bankruptcy involves reorganizing one’s debt through credit counseling and a repayment plan, so in order to qualify, one must have a regular source of income and make enough money to meet monthly payments according to the specified plan. 


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