Secured Loans in Chapter 7 Bankruptcy

Secured Loans in Chapter 7 BankruptcyWhen a debtor files a Chapter 7 bankruptcy case, the automatic stay is immediately effective. The stay prohibits further collection efforts by a creditor while the bankruptcy is pending. What does a secured creditor do to protect its collateral?

If you hold the mortgage to a debtor’s home or a lien on a vehicle, the debtor can only keep possession of pledged collateral in a Chapter 7 if the payments are current or the lender agrees to new payment terms. If the debtor is seriously delinquent on payments under the mortgage or vehicle loan, you should retain an attorney to assist you with applying for relief from the automatic stay.

In sum, a Chapter 7 debtor has one of four options:

  • Keep the payments current
  • Redeem the vehicle for its value (usually NADA wholesale or its equivalent)
  • Surrender the vehicle
  • Reaffirm the debt

If you need assistance protecting your rights as a secured lender in a Chapter 7 bankruptcy case, contact an attorney at Windtberg & Zdancewicz today.

The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation.  We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases.  If you need assistance, or are interested in learning more, please contact us at (480) 584-5660.