A secured debt is a loan or credit obligation backed by collateral. This means that the specific asset may serve as collateral, and your creditor may exercise the right to seize it if you default on your payment obligation. Common examples of secured debts you may possess are your home, motor vehicles, and other expensive assets that required a loan or payment plan. Well, you may wonder if you can get shielded from such creditor collection activities when you file for Chapter 7 consumer bankruptcy. With that, please follow along to find out what happens to secured debts and how a proficient Rockland County Chapter 7 bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can help you protect them in these proceedings.
What happens to secured debts in Chapter 7 bankruptcy?
For one, if your secured debt is eligible for discharge in your Chapter 7 bankruptcy filing, you may eliminate your financial obligation to pay it off. Secondly, though, your bankruptcy filing does not bar your creditors’ rights to place liens on the properties serving as collateral. This is to say that they may repossess the property or force its sale if you continually fail to make your debt payments on time. This may happen at your case’s close or sooner if the New York State Bankruptcy Court decides to lift the automatic stay to let this foreclosure or repossession happen.
How can I keep secured debts in Chapter 7 bankruptcy?
Based on what you have learned thus far, you may now understand the importance of bringing your payments current before filing for Chapter 7 bankruptcy. You should only attempt this if it is manageable, otherwise it may be in the best interest of your financial freedom to surrender this property and walk away from this crippling debt.
Or, you may attempt to protect these secured debts through eligible bankruptcy exemptions. Essentially, bankruptcy exemptions are meant to protect your property’s equity. For example, in New York State, you may protect up to $5,500 in equity in a motor vehicle or $13,625 if the vehicle is equipped for a disabled person. For example, if your vehicle is worth $10,000, and you still owe $7,000 to your creditor, you may have $3,000 in equity. And so, this strategy may only be worth it if your property is worth more than what you owe on your secured debt.
Last but not least, you may consider redeeming your property. This means that you may pay the value of the property in one lump sum payment to satisfy your outstanding secured debt. After this, your debt obligation toward your creditor may be relinquished. In contrast to the bankruptcy exemption method, this may only be worth it if your debt balance is more than the property’s value. Of note, though, this may not be used for real estate, business, or intangible properties.
If you require further clarification on this issue, a talented Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. is willing to offer it. So please do not hesitate to seek out our services. We look forward to helping you.
