Many times our clients ask, “Will I lose everything I bought with credit cards when I file for bankruptcy?” The answer to this question is “No.” You will not lose everything you bought with credit cards when you file for bankruptcy.
Generally, you can keep everything that you bought with credit cards when you file for bankruptcy. The reason why you can generally keep everything you bought with credit cards when you file for bankruptcy is because credit cards are usually unsecured debts. An unsecured debt is a loan or other form of debt that has no security interest that can be taken back if you default on the loan payments.
Other loans such as mortgages or car loans are called secured loans because the loan is “secured” with the collateral of your house or car. With these secured loans, the security interest – such as your house or car – can be taken back to help cover the creditor’s losses if you default on the loan payments.
Credit cards, on the other hand, are usually completely unsecured loans. That means that the creditor is only extending you a line of credit on the credit card and they do not desire to take a security interest in anything that you purchase. It is simply an open line of credit that you’re able to use however you desire: as long as you abide by the terms of the agreement.
Credit cards cannot usually “take back” your purchases. Therefore, you can usually keep anything that you have already purchased with the credit card if you default on your credit card payments. If you are bogged down with excessive credit card debt, you may need to consider your options for debt relief. If you have any questions about credit cards or any other matter relating to debt relief, give her office a call.
~Indianapolis Bankruptcy Attorney John F. Bymaster