When Creditors Take Back Secured Debts

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We talk a lot about secured and unsecured debt in bankruptcy. Unsecured debts are debts that do not have property attached to them, and thus cannot be garnished by a creditor (unless through specific court orders). But secured debt, because there is property attached to it, can be physically taken by creditors. Below we discuss what happens when creditors decide to take back secured debts.

When Creditors Take Back Secured Debts

A secured creditor can legally move to enforce payment if you default on your loan obligation. It should be noted that this action can be halted by an automatic stop when you file bankruptcy. This bars creditors from moving forward with collecting any property.

If a collector does move forward with seizing property, here are the forms of seizure that can happen:

Repossession. This is when a secured creditor takes back an object that was either used as collateral, rented, or leased. Typically a secured creditor is not required to go to court to obtain an order to repossess cars or other vehicles.

Foreclosure. This is when a mortgage or home lender takes possession of a mortgaged property because the homeowner has failed to keep up mortgage payments. This does not require a court action in most states, and can happen within a matter of months.

Court action. A secured creditor is able to file a court action to obtain a judgment against a debtor for either the entire amount that is owed, or for any balance that is left after it has deducted the value of any other collateral it seizes as part of payment.

Working with a Bankruptcy Attorney

Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix business bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.

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