|When you finance a house or car, the creditor holds a
security interest in the house or car. This allows the creditor to
repossess the car or foreclose on the home if you fail to make the
Stores that finance merchandise which they sell usually retain
security interests in durable goods that they sell. Finance
companies will often obtain a security interest in things you
already own when they make a loan. This security interest will
allow the creditor to repossess the merchandise which has been
financed if you fail to make the payments.
With the exception of some security interests in exempt household
goods, the discharge does not remove a creditor's security interest.
In Liquidation Bankruptcy, you have three
- You may surrender the property securing the debt. The balance
of the loan will be discharged so the creditor cannot seek a
deficiency judgment. [11
USC � 523(a)(2)]
- You may reaffirm the debt in order to keep property.
You must usually bring all payments current. If you reaffirm and
miss payments, the creditor will be able to repossess the
property and obtain a deficiency judgment as if you had not
filed bankruptcy. [11
USC � 524(c)]
- You may redeem the property by paying the present value
of the property in cash. [11
USC � 722]
In Debt Adjustment, your plan payment usually replaces
all payments on secured debt except home mortgage payments and lease
payments. You will no longer have to make separate payments on
financed vehicles, credit cards, unsecured debt, or taxes. In
many cases, the plan payment is less than the car payments alone!
If you are behind on your mortgage or lease payments, the plan
can take care of the back payments. You must make all mortgage
and lease payments which become due after your case is filed if you
intend to keep the home or leased property.
[11 USC � 1322]