Secured And Unsecured Loans In Bankruptcy

Student Loans Alberta - Secured And Unsecured Loans In Bankruptcy

When it comes to taking out a loan, you should know they are not all the same. There are many types of loans and the terms and conditions of a loan can vary greatly. Separate types of loans each have their own benefits and risks. The terms of a secured loan can be stricter than an unsecured loan. One of the main differences in the middle of these two types of loans is how debt range efforts are handled in the event you default on your loan payments. Your debt refund options may be managed differently in a secured loan than an unsecured loan. In the event of an extended financial hardship, you may not be eligible to have inescapable types of loans eliminated straight through bankruptcy.

Student Loans Alberta

Secured Loans

Most major loan purchases, such as your home or car, are called secured loans. They are called secured loans because the debts acquired under this type of loan are secured against collateral. A mortgage loan is considered a secured loan. In a mortgage loan, the lender has the right to repossess the home if you default on your payments. Defaulting on a mortgage loan can lead to foreclosure, whereby the lender takes over the ownership to the home and may sell the home in order to satisfy the debts owed. Loans for car purchases are also secured loans. The lender can repossess your car and sell it to recover the loan amount. If the sale of the asset does not satisfy the full estimate of the debt that is owed, you may still be held liable for repaying the remaining estimate owed on the debt.

A personal secured loan is one in which you are using your home or car as collateral, but the money received in the loan is used to purchase other items. An example of a personal secured loan is a payday loan, in which you put the title to your car as collateral against the loan. Even though the loan is not used for the purchase of the car, the lender has the right to repossess the car if you default on repaying the loan. If your car is repossessed during a payday loan, you are still liable for any debts still owed on your car loan straight through the originating lender. This can lead to added financial issue and more debt.

Secured Loans And Bankruptcy

Secured loans can be more difficult to administrate when if you find yourself in financial trouble. A secured loan may not be eligible for elimination if you file for bankruptcy. In some cases, a chapter 7 bankruptcy can eliminate the debt owed on a secured loan, but you may risk losing the asset to the lender. Legally, lenders are allowed to seize and liquidate some of your assets in order to fulfill the debt payments of a secured loan. However, there are many states whose bankruptcy laws may offer exemptions for some of your assets. Bankruptcy exemptions may allow for your home and car can be protected from liquidation during bankruptcy. A chapter 13 bankruptcy can protect your assets from liquidation straight through a chapter 13 refund plan. The refund plan allows for you to keep your assets while you make payments towards the loan over the policy of 3 to 5 years. Once you complete the refund plan, you will be relieved of your loan debt and own the ownership to the property.

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