What Happens in Bankruptcy When You Have Collateralized Debt?
When you’re seeking protection in a personal bankruptcy filing, you’ll often have debt that’s unsecured, such as credit card arrearages or medical bills, but you may have secured debt as well, including a mortgage or car loan. If you qualify to permanently discharge your debts in a Chapter 7 bankruptcy, it’s a pretty straightforward process to get rid of unsecured debt. But what about secured debt? After all, in addition to the debt, there’s a lien on the property securing the debt.
Can You Discharge Secured Debt?
The simple answer to the question is “yes.” It’s important to understand, though, that the discharge of the debt doesn’t have any impact on the lien. The lender will still be able to enforce the lien if you’ve violated the terms of the agreement. Accordingly, if you have not made mortgage payments, for example, you’ll be in default, and the lender can exercise any of its rights as provided in the agreement or afforded by law, including foreclosure. If you haven’t been paying your car note, the lender will have the right to repossess the vehicle.
Of course, you can always surrender the collateral to the lender. Once you do, the debt is no longer secured. Or, if you want to keep the collateral, you can “reaffirm” the debt, which means that you make a new commitment to be financially responsible for paying the debt. The lender may be willing to negotiate with you and may, for example, waive any accrued late fees or penalties. An experienced bankruptcy lawyer can help you through this process.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
Let us help you take the right steps and make good decisions when filing for personal bankruptcy protection. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.