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Bankruptcy Secured Debt

Secured debt is debt that is incurred by a debtor, who grants an interest in real property or personal property, typically when the debtor is purchasing property and obtaining a loan. The best examples are a mortgage and automobile loan financing. Debt in connection with a house, includes a note and mortgage. The note is the document that reflects the amount borrowed and the required payments for the loan. The mortgage is the document reflecting the security interest in the home. In New Jersey, the mortgage document must be filed with the County Register of Deeds. Debt in connection with automobile financing, includes a note and security agreement, which grants the finance company a secured interest in the vehicle. Typically, the finance company holds the title until the financing is satisfied. Also, the finance company must forward the title to the New Jersey Department of Motor Vehicles. There are other examples of security interest, such as a security interest with regard to the financing of furniture.

Purchase Money Security Interest

A purchase money security interest by law grants the financing company an interest in property, when the financing is used to purchase the personal property. An example of this may be purchasing furniture or an appliance.

In New Jersey, the law may grant an involuntary security interest to a creditor. An example of this type of security interest is the New Jersey automobile surcharge lien, condominium association lien, tax lien, etc. Please note that a judgment lien is not considered a secured interest, but rather an unsecured judgment lien.

Secured Creditors in Chapter 7

Typically, a Chapter 7 discharge discharges a secured debt, only with regard to the creditor’s ability to sue the debtor for the monies due. The discharge does not discharge or extinguish the creditor’s right to repossess or foreclose on the debtor’s real or personal property.

Secured Creditors in Chapter 13

During the plan, the debtor must pay the secured creditor, if the debtor wishes to keep the property. The payments to the secured creditor must be made to the creditor, pursuant to the contract with the creditor, or as modified by the bankruptcy plan. In other words, with regard to a mortgage payment, the debtor must make regular monthly mortgage payments to the mortgage company. The chapter 13 bankruptcy plan may require that a portion of the monthly trustee payment be paid to the mortgage company, in the event of pre-petition mortgage arrears. With regard to an automobile, the debtor may pay the entire amount to the auto finance company through the bankruptcy plan. Under this scenario, the debtor would not be required to make any payment directly to the auto finance company.

Contact a Bankruptcy Lawyer in NJ

If you have questions about secured debt and you are considering filing for Chapter 7 or Chapter 13 bankruptcy, contact The Law Offices of Robert Manchel for advice. Robert Manchel, a NJ bankruptcy lawyer, has been guiding families and individuals through the bankruptcy process for 18 years. Call (866) 503-5655 today for a free consultation.