Bankruptcy

What are Secured Debts? What are Unsecured Debts? What are Priority Debts? What is a Judgment Lien?

By Joseph McDaniel, Esq.

But in the same way that Eskimos have three hundred words for "snow", Arizona bankruptcy lawyers have many, many different words for debts, because the precise kind of debt determines how that particular debt is going to be handled in the bankruptcy case.

Secured debts are the king of the hill. They have a special relationship to a particular asset. For instance, your mortgage is a secured debt. The lien on your car is a secured debt.

Unsecured debts aren't so lucky. They are debts on which you are personally liable, but they aren't "attached" to a particular asset. Usually. Note that this area of law, like all of 'em, has lots of exceptions. But for this simplified discussion, unsecured debts include credit card debts, medical bills.

Priority debts are paid out of a bankruptcy estate if there is money to pay them before any payments are made to poor old unsecured debts.

And if somebody takes a judgment against you and records that judgment in the Maricopa County Recorders Office, for instance, it's probably going to become a judgment lien on real property you own in Maricopa County (like your house, for instance), and have to be paid when you want to sell your house, unless you can scrape it off in a bankruptcy with a special mini-lawsuit. There are also consensual liens, like the one on your car. Judgment liens and the consensual liens on your car are usually secured debts.

Confused? Don't worry. So are most lawyers.

Doesn't a discharge get rid of debt?

No. The discharge will block a creditor from collecting on a debt in connection with your personal liability. But a properly perfected lien or security interest or mortgage or deed of trust is not set aside by the discharge, and all those have to be discussed with your bankruptcy lawyer.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 04, 2009 (boomark / email).