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In the last article I touched briefly on whether or not you could continue to make payments on property used as collateral without having to reaffirm the debt with the lender. To understand your options with regard to personal property used as collateral, I will be using the example of a car loan.
The overhaul of the U.S. Bankruptcy laws in 2005 significantly impacted the way secured debt is handled in a bankruptcy proceeding. Those changes were to the great benefit of debtors, our clients. Secured debt is a loan where you have pledged an asset (most commonly a car or a house) as collateral. In the event you do not repay the loan, the creditor has the right to take possession of the property, sell it, and recover what money it can from the sale.
I guarantee that no one wished upon a star as a young person and thought to themselves “I want to be a real estate mogul and a famous singer and…bankrupt!” That has NEVER happened. However, even real estate moguls and famous singers have ended up bankrupt. Do the names Donald Trump or Toni Braxton ring any bells? And look at them both now – very successful again. What they have in common is that they both needed to go through the bankruptcy process in order to regain their spots at the top.