Bankruptcy law is complicated, and it may be challenging to determine whether you qualify for Chapter 7 or Chapter 13 bankruptcy. If you’re in over your head with unsecured debt, turn to The Gil Law Firm in Dothan, AL, and read on to learn how filing for bankruptcy could stop your balances from accruing interest:
What Is The Difference Between Secured & Unsecured Debt?
There are two main kinds of debt, and bankruptcy law treats each type of debt differently. Secured debt has some kind of collateral attached to it, like a house or a car, which the bank can sell if you fail to make payments. Unsecured debt has no collateral. Some examples of unsecured debt are student loans, credit card debt, and medical bills.
Does Debt Still Accumulate Interest After You Declare Bankruptcy?
Chapter 13 bankruptcy is essentially a reorganization of debt. When you file for chapter 13, you must still pay back your debt, but the court will help you devise a manageable payment plan in order to do so. In general, secured debt continues to accrue interest at the regular rate after filing for Chapter 13, while unsecured debt does not.
On the other hand, arrearages—the amount that you have fallen behind on regular payments for secured debt—will stop accruing interest after you file for Chapter 13 bankruptcy; however, the regular payments will still continue accruing interest at the regular rate that was initially agreed upon by the lender and borrower.
If you have additional questions about the ramifications of filing for Chapter 13 bankruptcy, the team at The Gil Law Firm in Dothan, AL, will be more than happy to answer them. Visit their website to learn more about their experience practicing bankruptcy law, and call (334) 673-0100 to schedule an initial consultation today.