Mortgages & Car Loans in Bankruptcy

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Mortgages and car loans are the most common types of secured loans that most people might have. Unlike unsecured debts (credit cards, loans, etc.) a secured debt has two parts.

Debt Liability

The first part of a secured loan is the debt itself. When accepting a secured loan, you accept a legal liability to repay that debt. In bankruptcy, you can free yourself from that liability.

Lien

The second part of a secured loan is a lien against the collateral "securing" the debt. In the case of a car loan, the lien holder (the bank or lender) can use the lien to take possession of your car in the event that you fail to keep up on your car payment. Similarly, if you fail to keep up on your mortgage the lender has the right to foreclose and repossess the property. The collateral can then be sold to regain some or all of the outstanding debt.

While bankruptcy can free you from the liability to repay these debts, it cannot remove the lien. Therefore, upon the conclusion of your bankruptcy the lien holder can repossess the property unless you are able to work out some arrangement during the bankruptcy process.

Get in-depth information on your options for dealing with secured loans in bankruptcy by browsing the links below.

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