Bankruptcy and Secured Creditors

: Reese Baker & Associates

  Filed under: Debt

There are two types of debt to be considered when you file bankruptcy. Unsecured debt includes credit cards, loans, and medical bills. And secured debt is where the creditor holds the property as collateral against the loan.

When you file bankruptcy, all actions to collect a debt from you must be stopped. That includes the collateral like your home or your car from being seized for nonpayment.

Judgment

If your lender takes you to court and receives a judgment against you, you can ask the court to stop the creditor’s ability to seize the collateral. Another option you have for the secured property is to “redeem it.” This is where you can pay the creditor what the property is worth instead of the balance of the loan.

Chapter 13 Bankruptcy

If you choose to file Chapter 13 bankruptcy because you are behind in your mortgage but want to keep your house, the automatic stay will stop the foreclosure. Chapter 13 allows you to catch up on your back payments over a period of three to five years, for however long the payment plan is that you worked out with the trustee. Sometimes you can lower your monthly payment or interest rate on the loan. If you wish to keep your secured property, you will have to continue to make the payments.

If you are considering bankruptcy, contact a Houston bankruptcy attorney to find out how you can get a fresh financial start by eliminating all of your qualifying debt.