Is a Mortgage Secured or Unsecured Debt?

large suburban house

Upon declaring bankruptcy, your debts may be divided into what are known as secured and unsecured debts. For one, a secured debt is backed by property, which the lender has a lien on. On the other hand, an unsecured debt is deemed a riskier loan not backed by any collateral. Read on to discover whether your mortgage is considered a secured or unsecured debt and how a seasoned Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you attain financial relief.

Is my mortgage considered secured or unsecured debt?

To reiterate, a secured debt is one that is backed by collateral, otherwise known as assets that you have in your possession. Therefore, your mortgage is considered a secured debt because you will have to “offer up” your home to back the loan. With this, your lender will have a lien on your home, which means that they will gain the legal right to seize or sell your home if you cannot fulfill your financial obligation yourself. This lien remains in full effect until you pay every last penny back. Ultimately, this serves as an incentive to make your monthly mortgage payments.

With that being said, other examples of secured debts include, but are not limited to, home equity lines of credit, home equity loans, and auto loans. Constranginly, debts that are considered to be unsecured include, but are not limited to, personal loans, student loans, and credit cards. Because there is a lot more trust that goes into paying off this type of debt, it often comes with a higher standard of eligibility; such as having a higher credit score or accepting a higher interest rate.

Can I protect my home by filing for Chapter 7 bankruptcy?

If you begin to grow worried that your lender will seize or force the sale of your home, then you may turn to a Chapter 7 bankruptcy filing. First, this is because the New York bankruptcy court will impose an automatic stay on your home. But also, New York’s homestead protection law may allow you to declare a portion of your home as “exempt.” Namely, you may claim up to $150,000 of exempt property in Rockland County, which may be doubled at up to $300,000 for married couples. This is relevant if you believe that your home’s equity is not enough to cover your other debts, and hence it is unnecessary to give it up.

It is also worth mentioning that this homestead exemption will be automatically figured into your bankruptcy court case. However, for this to work, you must ensure that you are capable of staying current on your mortgage payments. This comes along with having to confirm a sufficient future income to remain current.

With the complex court proceedings ahead, you should not go through it alone. Rather, you should have a competent Rockland County bankruptcy attorney from The Law Offices of Allen A. Kolber, Esq. stand by your side throughout. Contact our firm today.