A “secured debt” is any type of debt that you obtain by agreeing to give the lender an interest in some type of property in exchange for the loan (also commonly referred to as collateral). The most common types of secured debts include car loans and mortgages.
Many people wonder if they will still owe secured debts after filing bankruptcy. The answer to this is yes and no. Filing bankruptcy gets rid of your legal obligation to repay the debt, meaning that the creditor can’t sue you to get paid. However, the creditor can still take bank their collateral if you don’t pay the debt. This means that if you don’t pay for your mortgage or car loan, the lender can’t sue you, but they can repossess your car or foreclose on your home.
For this reason, if you want to keep property that you pledged as security for a debt, it is important that you continue to make payments for it during and after your bankruptcy case. Some lenders may also require you to sign paperwork agreeing to be legally responsible for the debt after the bankruptcy (called a “reaffirmation agreement”). If you have any questions about how your secured debts will be treated after filing bankruptcy, speak to your bankruptcy attorney about it.