Secured Debt and Unsecured Debt
A secured debt is a debt secured by some collateral (an interest given by a debtor to a creditor in return for a loan). The largest secured debt in many people’s lives is the mortgage loan for their house, and the second largest is their car loan.
If you fall behind on your agreed-upon payments, a secured creditor has the right to repossess, or seize the security (like the house or car), and sell it to pay off the debt. Because secured debts are attached to an asset, the loans are not automatically released in bankruptcy. If the lender sells the asset, like your car, and they do not receive enough to pay off the entire loan, the difference, known as the shortfall, is still owed by you. Contact your Trustee to ask about your options.
An unsecured debt is one where no such security is attached. Many people assume that if they go bankrupt, the credit card company can take back whatever was purchased with a credit card. This is not usually the case, as credit cards generally represent unsecured debt. These debts are among those which are discharged by bankruptcy.
Consult a trustee for more information about different types of debt, and whether a consumer proposal or bankruptcy will help you.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.