The Effect of Bankruptcy on Secured Debt
How debt is handled during bankruptcy depends upon what kind of debt it is (secured or unsecured, dischargeable or non-dischargeable) and on the kind of bankruptcy you are pursuing.
In fact, the type of debt that is creating a problem for you will be one important factor in your attorney's decision about whether to file for Chapter 7 or Chapter 13. (Other factors will be income and past bankruptcy history.)
At Marrs & Terry, PLLC, we have helped thousands of people like you get back on solid financial ground. To learn more about how we can help you get a fresh financial start and freedom from debt, contact us to schedule a free consultation. We have six Michigan offices for your convenience: Flint, Ann Arbor, Pontiac, Jackson, Rochester and St. Clair Shores.
What Is Secured Debt?
Secured debt is debt that, if you default on a bank loan, can be repossessed. Examples of secured debt include car loans, home mortgages, boat loans, major household appliance loans.
How Is Secured Debt Handled in Bankruptcy?
Secured debt will be handled differently depending upon whether you are filing Chapter 7 or Chapter 13 bankruptcy.
- Under Chapter 7, you will have the option of reaffirming your debt and keeping the asset or allowing the lender to repossess the asset.
- Under Chapter 13, your debt reorganization plan can reduce and extend monthly payments on secured debts.
What About a Home Mortgage?
A great deal depends upon whether you are behind on your payments, whether you are upside down on your loan (you owe more than your home is worth), or you have a great deal of equity in your home. If you have a great deal of home equity or you are behind on your mortgage payments, Chapter 7 is not the right option for you.
- Under Chapter 7, you will have the option to reaffirm the loan if you have kept up with your payments.
- Under Chapter 13, you will be allowed to make up missed payments over a period of time. You may be able to reduce your mortgage payments by stripping a second mortgage from your property.
Take action to change your financial future. Contact Marrs & Terry online or call us toll-free at 866-665-8095.
Have you been told you don't qualify for bankruptcy? Talk with one of our experienced bankruptcy lawyers for a second opinion.
