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What Happens to Secured Debts in Bankruptcy

    Secured debts are debts that are secured by a piece of property or collateral, such as a car or a house. In bankruptcy, the treatment of secured debts depends on the type of bankruptcy you file and the specific laws in your jurisdiction.

    Chapter 7 bankruptcy: In Chapter 7 bankruptcy, if you want to keep the property that secures a debt, you will typically need to continue making payments on the debt. If you do not want to keep the property, the lender can repossess it. In some cases, you may be able to give the property back to the lender and have the debt discharged in your Chapter 7 bankruptcy.

    Chapter 13 bankruptcy: In Chapter 13 bankruptcy, you can keep your property and catch up on missed payments over the course of a 3-5 year repayment plan. This can be a helpful option for individuals who are behind on mortgage payments or car payments and want to keep their property.

    It’s important to keep in mind that the specific laws regarding the treatment of secured debts in bankruptcy can vary depending on the jurisdiction, and it’s important to consult with a bankruptcy attorney to determine the best course of action for your specific financial situation. The attorney can help you understand your options and develop a strategy for resolving your secured debts in the most favorable way possible.