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Definition of Secured Creditor

Secured Creditor

Secured creditors normally retain the right to seize their loan collateral, even after a discharge is granted. The debtor must decide whether to keep the asset. If a debtor returns the collateral, and if a discharge is granted, in most cases, the debtor will have no further liability to the creditor. If you surrender collateral outside of bankruptcy, you may still have liability on the debt and the creditor may seek a deficiency judgment against you.

A debtor wishing to keep the asset, such as an automobile or a house may “reaffirm” the debt or redeem the property in a Chapter 7 bankruptcy. A reaffirmation is an agreement between the debtor and the creditor in which the debtor promises to pay all or a portion of the money owed in order to retain the asset. The reaffirmed debt will still be owed after the discharge. In a Chapter 13 bankruptcy, most secured debts may be reorganized

 

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Posted November 2014