Secured Debt

Secured debt is any debt backed by a mortgage, pledge of collateral, or other lien. Secured debt can also be any debt for which the creditor has the right to pursue specific pledged property upon default. Some examples include home mortgages, auto loans and tax liens.

Debtors who file Chapter 7 bankruptcy may have forfeited their right to keep certain secured debts which are not exempt from the bankruptcy process. After the debtor files Chapter 7, a trustee is assigned to the case and will identify the nonexempt assets and potentially liquidate the secured assets to repay the creditors.

Debtors who file Chapter 13 bankruptcy may generally keep their secured assets by creating a Chapter 13 repayment plan and continuing to make payments for debts over a 3 to 5 year period. Failing to meet the obligations of the repayment plan can result in the ultimate repossession of secured assets.

Secured debts are not discharged by filing Chapter 7 or Chapter 13 bankruptcy. For instance, if you have mortgage debt or you own money for a car loan, this cannot be discharged in bankruptcy. Bankruptcy is used to discharge certain unsecured debts such as medical bills and credit card debts.