COVID-19 has put a lot of Americans into financial hardship. You need to know about debt, what the difference is between secured and unsecured debt. The types of debt and the bankruptcy chapter will determine what happens to your debt, like whether a collection agency can get back the debt, or whether it can be discharged. Read on to find out more about secured debt. 

For more information, talk to an expert in bankruptcy laws at Thomas E. McIntire and Associates, L.C.

Secured debt: Definition

A secured loan/secured debt is something that you owe that is backed by collateral. 

Lien is the term for the security interest granted over the property to secured payment. The lien is what makes a debt secured. If a debt is secured, this gives the lender more confidence over letting you borrow money, as there is a way for them to collect repayment. 

Comparing unsecured debt

Unsecured debts are those not backed by any collateral. If the debtor defaults and is unable to repay, there is no property that the creditor can seize to get the debt repaid. Typically, lenders look for someone with a good credit score to take out unsecured loans because they’re confident in their ability to pay it back.

Examples of unsecured debt include credit cards, medical bills, and utility bills.

Involuntary and Voluntary Liens

secured debtsInvoluntary Liens

These are liens placed on a property by others for unpaid obligations, usually by court order, or by federal or state statute. The most common example of these is tax liens. 

Voluntary Liens

A voluntary lien is taken out consensually during the transaction, whether through a contract, mortgage, or deed of trust. This gives the creditor security interest. It also allows the creditor to takes actions such as foreclosure for a home mortgage, or repossession for cars, if the debtor cannot pay the loan debt.

Perfecting a Lien

Perfecting a lien is the legal process where a lender informs other parties of the lien and establishes priority versus other creditors. This gives this creditor the right to foreclose the property if the debtor fails to make the monthly payments on time. 

There are big consequences for a creditor who doesn’t properly perfect a lien. If you file bankruptcy, the court may set aside a lien that was not perfected, meaning that it’s treated as if it doesn’t exist, and the lender turns into an unsecured creditor.

Collecting Secured Debt

If you can’t pay off your secured debt, there are several ways a creditor can collect. Here we list down ways collection agencies can take back the debt.

Repossession. A secured creditor may repossess the property of a borrower if they have defaulted on payments. If you want to know how to keep your vehicle from getting repossessed, contact a bankruptcy attorney immediately.

Court action. A secured creditor may file a court action to obtain a judgment against a debtor for the entire amount owed, or for the balance remaining after deductions.

Foreclosure. A lender may sell a home in a foreclosure sale for secured loans. Lenders also can foreclose liens against personal property, in most cases without a lawsuit.

You may be drowning in student loan debt, medical debt, or credit card debt. If debt collectors are hounding you trying to get your debt paid off, filing for bankruptcy might be a way to get them off your back. If you can’t pay back your debt, a bankruptcy filing places an automatic stay, preventing any collection action for any debt collector. Bankruptcy discharge can help you deal with mounting debt.

Of course, it’s not an easy decision to go bankrupt. It affects your creditworthiness and stays long on your credit history. It’s best to talk to an expert in bankruptcy law to discuss your options with a bankruptcy case. It may be possible for you to get a payment plan or have your assets liquidated to pay the debt.

If you’re considering bankruptcy or would wish to clarify the bankruptcy information, talk to us. Consult one of our experienced bankruptcy lawyers at Thomas E. McIntire and Associates, L.C. We’ll help with filing bankruptcy so you’ll get out of debt and get a fresh start. Call 304-232-8600​  for more information.