The Three Types of debt:
When looking at bankruptcy we divide your debt into three categories: Dischargeable, Non-dischargeable, and secured.

The following descriptions are very general - there is a great deal of complexity when it comes to dealing with debt, and this information is no substitute for legal advice from a trained, knowledgeable attorney.

• Dischargeable
  These debts go away once you receive your discharge. Examples include medical bills, credit cards, old cellular phone bills, unsecured personal loans, lease arrears, and charges on a vehicle that was repossessed. Most of the debt we see is dischargeable, and is the major factor in a family’s decision to file for bankruptcy.
• Non-dischargeable
  These debts are not affected by bankruptcy, and you still need to pay them. For the most part, they are specific types of debt that Congress has singled out for special treatment. The most common non-dischargeable debts are: back income taxes less than 3 years old, back alimony and child support, student loans, criminal fines, and credit card charges made within three months of filing. We also recommend our clients pay the face value of any bounced checks (except for payday loan checks). When you file, you need to make arrangements to take care of these debts - either on your own in a Chapter 7, or through a repayment Plan in a Chapter 13.
• Secured Debt
  Secured debt is a note secured by collateral – property that the creditor can take if you do not make your payments. The most common examples are car payments, house payments, and payments on recreational vehicles such as jet skis and motorcycles. Nebraska Furniture Mart, Best Buy, Dell, and many jewelry retailers also take security interests in what you purchase, if you apply for their store credit account.
  
  You have a choice when it comes to secured property. You can either keep the property and continue to pay for it, or give the property back, and not owe anything. If you return the property, you will not owe anything on the note, even if you owed more than the value of the collateral. The "deficiency" (what is left on the note after the creditor sells the collateral) is discharged just like a credit card.

Exempt and Non-exempt Property
What happens to property you keep depends on what chapter you file. In a Chapter 7, you sign an agreement to continue to pay the balance of the note, and the contract rate of interest, in order to retain the use of the collateral. You also agree to re-assume personal liability on the debt again - if you fall behind on the payments and the creditor sells the collateral, you are on the hook for any deficiency, even after you receive your discharge in bankruptcy. In a Chapter 13, you usually pay the balance of the note through the repayment plan. If you have owned your vehicle for more than 910 days, however, you only need to pay the value of the vehicle or the contract balance, whichever is lower. This can be a huge benefit to a family who needs to retain an “upside down” vehicle. Often this “cram down” will allow the family to enter into Chapter 13 protection with a total Plan payment lower than its pre-filing car payment! On the day of filing, the family can stop paying on credit card debt, get into bankruptcy protection, and have more money freed up to cover ongoing expenses - it’s a huge, immediate boost to the family’s financial health.

In general, bankruptcy will cancel most of the high interest consumer debt that corrodes your budget. This should free up money to address the policy-based non-dischargeable debt (like back taxes) and secured property you want to keep (like your mortgage and car payment). If you can handle the remaining debts on your own, you might consider a Chapter 7. If you need help addressing the debts that remain, you should consider a Chapter 13 financial restructuring.