Various types of debts must be considered by the court when determining your eligibility. Secured debts are one of the most significant types of debts.
What is a guaranteed debt? It is one in which, if you fail to repay the debt, the creditor can repossess the collateral used to secure the loan. Americans are most accustomed with home mortgages as a form of secured debt. If you neglect a certain number of payments and default on your mortgage, the creditor may initiate the foreclosure process to seize the property.
However, there are additional methods by which a debt can be secured. For instance, if you fail to pay a contractor who performed work on your home, he may register a lien against your property. Once he does so, your property becomes collateral for a debt. You cannot sell the property until the lien amount has been satisfied.
A home equity loan is another form of secured debt. In essence, a home equity loan is a second loan. Therefore, it generally follows the same regulations as a default on a primary mortgage. Less expensive forms of secured debts include automobiles, boats, trailers, etc. When you sign the sales contract to purchase these items, you authorize the lender to repossess the property if you fall behind on your payments.
There are numerous other secured debts that are less prevalent. When a bank grants an individual a personal loan, they frequently require collateral. Depending on the state, a lien may be placed on your residence and any other personal property you may own if you are sued and awarded money. Lastly, taxing authorities such as the IRS can place a lien on your property to collect delinquent taxes.
When you file for bankruptcy, establishing your secured obligations is crucial in assisting the judge in determining whether your request can proceed.
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