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How Does Bankruptcy Affect Secured and Unsecured Debt?

How Does Bankruptcy Affect Secured and Unsecured Debt?

Interviewer: What is secured versus unsecured debt and what will happen in bankruptcy to both of those debts?

Unsecured Debt Is Not Secured by Collateral, Secured Debt, Such as a Home, Is Secured by Collateral

Tanya: An unsecured debt would be a credit card or a medical debt or anything that is not secured by collateral. A secured debt is a debt that is secured by collateral, so a mortgage, the note and mortgage on a home is secured by the home.

Secured Debts Are Subject to Seizure for Non-Payment

If you don’t pay your debt, then the lender can come and take the house to pay off the debt. A car loan is a secured debt. The creditor can come and take the car if you don’t pay to sell and pay off the debt. A pension loan where you own a pension and you’re taking money against your pension is secured with the pension. If you don’t pay the pension loan, they’ll take your pension money.

A Visa card that doesn’t have any money behind it has no security. If you charge $1,500, there’s nothing Visa can take from you to cover that debt.

Unsecured Debts Can Be Collected Through Judgments Obtained by a Lawsuit

One of the reasons why people file for bankruptcy is if the creditor sues you, he will get a judgment against you.

When there is a judgment against you that becomes a secured claim so that judgment then will attach to your house. The creditor can place a levy on a bank account with that judgment or he can take your car because of that judgment, which is the product of the lawsuit.

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  • "Ms. Helfand was very professional and helpful with our bankruptcy case. Her advice was very useful and helped us make the proper decisions for our situation. In addition, she was very supportive during a very difficult time for us. Finally, she set very specific fee expectations and there were no surprises when it was completed. I would use her services again and would recommend her, without question."

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  • "Tanya and her team were very professional handling my divorce proceedings. She was very proactive in making the other attorney finally get the process moving forward. I would recommend her to anyone looking for legal services. "  -Scott

  • "Ms. Helfand strategized & processed, both, my Divorce & Chapter 13 Bankruptcy. As both cases were emotionally and legally challenging, Ms. Helfand proved to be an empowering Mentor along the path to clarity for which I am truly grateful. I highly recommend her legal expertise to anyone who is seeking a confident, savvy & caring attorney to become at peace with self and any legal matters."  -Vas

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