Secured loans are those in which the lender has an interest in the collateral, such as a home or car, that could potentially be taken back to pay the debt. Examples of secured loans include:
- Mortgages
- Deeds of trust
- Liens
- Auto loans
Bankruptcy debtors with secured debts may file either Chapter 7 or Chapter 13. Chapter 7 debtors generally must pay the secured loan on the same terms as before bankruptcy. Chapter 13 debtors may have options, however, to modify the terms on which a secured loan is to be repaid.
The handling of secured debt in Chapter 13 bankruptcy carries several conditions. The debtor’s plan must:
- Be accepted by the creditor OR:
- Propose how to pay the secured creditor’s claim OR:
- Relinquish the (collateral property) to the creditor
Most often, the plan must provide for payment of the value of the property plus interest from the date the plan is proposed. There are exceptions to how Chapter 13 bankruptcy creditors may assert their claims on secured debt. For example:
- If the collateral is the debtor’s primary residence
- If a vehicle or personal property was purchased within a specified period prior to bankruptcy filing—commonly called “910” claims
If the debtor has a joint obligation with a co-signer on a loan, and that co-signer has not filed for bankruptcy, the co-signer’s obligation is not affected by a Chapter 13 bankruptcy plan. Depending on whether the creditor’s claim is in full, the property may still be repossessed by the creditor. For that reason, some debtors will pay the co-signed loan in full, releasing the co-signer from any further responsibility for that debt.
If you would like more information about secured loans in Chapter 13 bankruptcy, creditors’ rights, or if you need assistance from an attorney, contact Windtberg & Zdancewicz to schedule an initial consultation.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation in all collection matters. We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.