Creditors; Secured, Unsecured or Priority!

When talking about debts you will often hear folks distinguish between secured and unsecured debt.  A secured creditor, or secured debt, is debt that upon the debtor's default the creditor has the right to proceed against collateral and apply those proceeds against payments owed.


Now, in plain English .... let's take a car loan for example.  When you purchase a car and take out a loan from a bank to pay for it, the bank will secure the loan with the car.  What this means is that if you fall behind on your payments, the Bank has the right to repossess your car.  Once the car is repossessed they will most likely try and sell the car and apply whatever money they get towards the outstanding loan balance.  The Bank may also add any additional fees that they had to pay in repossessing the car, such as attorney fees, etc.  More often than not the money they obtain from the sale of the car will not cover the entire balance left on the loan so they then will come after you for any balance still owed!  So, in the end you've lost the car and still owe money!

An unsecured loan or debt would be something like a credit card, personal loan or student loan.  With this type of loan the creditor does not have the right to repossess the item you purchased, but instead would likely use the courts to obtain any monies owed from you.  Again, let's take an example.  Let's say I purchased a couch on a credit card.  If and when I fall behind on my monthly payments to the credit card company they have the right to file a Warrant-in-Debt against me personally.  Here in Virginia the Warrant-in-Debt is how the creditor asks the courts to verify that you owe the money.  Assuming that you are found to owe the money, then ten (10) days after the court hearing they then can obtain a garnishment and take up to 25% of your paycheck to be applied toward the monies owed.

[A warrrant in debt is a summons to a defendant to appear in court because they are being sued for a debt. For example, in Virginia’s General District Court, the most common means to initiate a claim is the Summons for Warrant in Debt. However, the warrant in debt provides only limited information and therefore is a notice-based pleading. Along with the bill of particulars, the warrant in debt makes the pleading fact-based. A warrant in debt is the initial filing to start a garnnishment proceeding in some jurisdictions.]

Several examples of Secured and Unsecured debts are as follow:

       Secured:       Home mortgage, car loan and high value items such as stereos, computers, air conditioners, etc.

       Unsecured:   Credit cards, medical bills, student loans, etc.
                                  

There is a third type of debt that comes into play during Bankruptcy - Priority Debt.  This category identifies creditors that are given special attention.  The most common examples are income tax debts and past due alimony or child support payments.

If you are considering bankruptcy, then understanding what type of debt you have is important.  Depending on whether you file a Chapter 7 or Chapter 13 Petition will provide you various options in dealing with your debt.  For example, in a Chapter 13 Bankruptcy Petition if you are behind in your car payments you may bring your payments current and keep your car.

Next time we'll talk some about property - what types there are and how it is handled in a Bankruptcy.  If you'd like to come in for a FREE CONSULTATION, please, give me a call!

757-410-9263

Visit our web site at http://www.KDBLawFirm.net

and follow us on Twitter

@norfolk-lawyer.

Be safe, be blessed and be proactive!

Let's Get Started!

One of the things that I find rather frustrating about blogs is that quite often they just ramble on - while I appreciate that everyone has something to share, I often find myself pressed for time and am looking for specific answers or guidance.  Therefore, with the assistance of a great SEO company, Internet Highway, as this blog comes to life I want to give it some direction.

Speaking specifically to Bankruptcy and Family Law, when folks have to seek out an attorney it is most likely because they are in need of help, not because they have an overwhelming desire to bond with someone they pay by the hour!  (no jokes please)  Most folks, prior to actually making an appointment to speak with someone, likely do some Internet searching first.  Given that premise I undertake this blog for two reasons.

First, I want to introduce myself and allow folks to get a better understanding of who I am and, more importantly (at least it would be for me), is to better understand the kind of lawyer and person that I am!  Let me try and explain; my wife's favorite joke is "What is the difference between a lawyer and a catfish?"  (sorry, you aren't going to get the punch line out of me!) and, because we all know at least one lawyer joke, my intent is to differentiate myself from the reputation my profession has earned!

Secondly, and personally of greater significance, is to provide some help!  A blog in and of itself is not going to reach out and make your problems go away, but hopefully, it will at least convey to you, a friend or a family member, that there is someone out there that cares and can help!  When life reaches out and grabs us with overwhelming family problems, or the creditors calls are getting intrusive, is when we sit down at the computer and try to figure out what to do.  I want this blog to be the lifeline that you, or someone that you know, can hang onto.

Understanding that this is how I make my living - this is what puts food on the table - Yes, I would like your business.  However, I want you to understand that as an individual (with my many flaws, quirks and less that always perfect reactions) I practice my profession with the foremost thought to help!  In short, if I do not think that I can help you, or that you even need the services of an attorney, then I will tell you.  If I know, I'll likely point you in the right direction, either to another professional, or maybe to a site and show you how to do it yourself!

So, in the coming weeks and months I am going (OK, what I really mean is that I'm really going to try hard and do this) to post several times a week.  Since I call myself a Family Law and Bankruptcy attorney that will be the focus of my topics.  I don't intend to make this a totally self-help blog - meaning that I'm not going to teach in such detail that you don't need me!  (Remember, I did say that this is what puts food on my table).  What I will write about are things that get you thinking about what you can do or which direction you should head.  For example, "Is Bankruptcy right for me?", "What does it mean if I adopt my step-child?", "What does Chapter 13 mean?", "Can I stop this foreclosure?", or "Do I really need a will?".  If you need to talk to someone about what to do, then I hope that you will consider me your resource!

So, I hope you stumble across this site and take the time to read a posting or two.  If you find them provocative or helpful then take a sec and post a comment.  Maybe share them with a friend that might need a chance at a lifeline.  Seriously, help me help someone else!

Have a Tebow kinda day!
(stand up for what you believe in)

How is My Credit Score Calculated? KDB Law Firm Credit and Bankruptcy Part One

Your credit score is an important number that determines your rate of interest on loans and credit cards. Do you ever wonder how your credit score is calculated? If you are like most people, your credit score is important to you, but it may also be a bit of a mystery.

Many of my clients have asked how their credit score is calculated. Let’s start with a little credit score 101.  The most common score used is the FICO score. The score, the 3-digit number, is calculated using several different inputs. The largest portion of the score is based on your payment history (35%); followed by your overall debt level, or amount you owe (30%); the actual length of your credit history (15%); the number of inquiries, also known as new credit, (10%); and closed out by your mix of credit (10%).  A detailed explanation of a FICO score breakdown can be found here: http://www.myfico.com/crediteducation/whatsinyourscore.aspx.

Based on this information alone, the most important thing you can do to improve your credit score is to pay your bills in advance! What is the reasoning here? Well, 35% of your FICO score is based on your payment history. Paying in advance ensures that your bills will be paid on time, because most companies do not post payments received on the day they receive them. Paying off your bills in advance of the due date ensures that your payment is posted in time and keeps your credit score healthy in the “Payment History” category of your FICO score.  Just keep this in mind- 35% of your score is simply paying on time! So post your payment in advance of the due date and you will help your credit score.

What happens when your financial situation becomes overwhelming to the point of NOT being able to pay your bills on time? To find out, read Part Two of our Credit and Bankruptcy Blog series. And be sure to check out our website http://www.KDBLawFirm.net for more information.

Be safe and take care! ~Kirk Berkhimer, Norfolk Bankruptcy Attorney.

Hey, Follow me on Twitter @Norfolk_Lawyer for timely updates and info!