Are Secured Assets Such as a Car or House Protected When You File for Bankruptcy?

Interviewer: What about items you have that are considered secured? Let’s say a car loan or a house loan, where there’s real property that secures the debt. Will you have to give the item back or can you keep it? What happens?

Homeowners You Have Two Options When Filing for Bankruptcy

Court: There are a couple of ways to do handle this. What happens when you owe for a secured debt, like what you are talking about, that is a debt that is backed by some sort of collateral. The best example is like a mortgage. You owe the bank money and they have the title to your house as security.

When you have a mortgage, you have a personal obligation to pay the mortgage lender back, and they also have that secured portion of your property that they can put a lien on if you don’t pay.

When you go through bankruptcy, let’s say you have a mortgage. Let’s say that it’s under water, and doesn’t have any equity, and you want to just go ahead and dispose of it and move on.

You Can Surrender Any Asset in Which You Do Not Have Equity

You can surrender the property, and your personal debt will be extinguished by the bankruptcy. Then the bank will take the house, and they can sell that and get whatever they can from it. But you won’t owe them any more money.

By Court Koehler

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