What are “Secured Creditors?”

What is a Secured Creditor?

In any chapter of bankruptcy you may have a secured creditor. A secured creditor is one that has collateral that backs up (“secures”) your debt. “Collateral” can be your home, your car, or home furnishings. These are secured debts.

I want to keep my car! Even in bankruptcy secured debts have to be paid if you want to keep the collateral, whether it is your car, home, boat, equipment or other type of collateral. It is best to be current before you file a bankruptcy and while you are in a bankruptcy case. If you are behind we can make recommendations on how to fix that.

Finance Company Loans. You can keep the collateral and discharge the debt. In many finance company loans consumers fill out a list of household possessions that secure the debt. In most cases you can discharge these debts in your bankruptcy and keep the household items. Each case is unique, so this should be determined in consultation with your bankruptcy attorney.

I want to get rid of the car/home! In this case you “Surrender” the collateral. If you do not want to keep your home or car, possibly because the payment is too high or you owe too much it can be surrendered. Your bankruptcy attorney will advise you as to when to stop making payments, and arrange for the orderly surrender the collateral. Afterward, you have no further requirement to make payments and cannot be held responsible for the debt.

Surrendering collateral does not mean you immediately have to turn in the car or move from your home. How surrender is handled in your case should be determined in consultation with your bankruptcy attorney.

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