Secured Debt Definition
Debts are classified based on different categories. If a Debtor has a debt, it is important to know how it is classified so the Debtor can determine if it is better to file a Chapter 7 or a Chapter 13 and how that debt will be treated depending on which Chapter of Bankruptcy he files.
The category that most people are familiar with is “Secured Debt.” When a person buys a car or a house, the loan they take out is a secured debt, because it is secured by the property the used the money to purchase. Any debt that is secured by property is a secured debt. Many people will get a loan and use property they already have to secure the debt. Others will have a secured loan on a computer they buy, jewelry, vacuum cleaners, household goods, and the list goes on and on.
The important thing to understand with regards to secured debt and bankruptcy, for the most part, the Debtor either needs to make payments on the secured loan, either directly to the creditor or through the Chapter 13 Plan, or they need to surrender the property and give it back to the Creditor. There are rare occasions when a Debtor has secured property that a Motion to Avoid the Lien can be filed and the Debtor can keep the property free and clear. This does not ever happen with a car or a house.
If you have questions about filing bankruptcy and live in one of the following areas, please click on the link for more information about bankruptcy:
Bankruptcy information in Detroit area
Bankruptcy information in Texas
Bankruptcy information in Pennsylvania
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