What Happens to Secured Debt in Chapter 13 Bankruptcy?

Do you have a mortgage, car loan, or other secured debt? Find out what happens to them in Chapter 13 bankruptcy.

If you have debts secured by property, when you file for Chapter 13 you can give up the property and convert the debt to unsecured claim, or keep the property and continue to make payments on the debt. If you are behind on your payments, you can catch up through your Chapter 13 plan.  

Here are your options and how each one works.

Surrendering Property

If you don’t want to keep property that secures a debt, you can surrender it (return it) to the creditor. The amount you owe to the creditor then becomes unsecured debt, which you pay along with other unsecured debt through your Chapter 13 plan, usually at a large discount. (To learn more about how unsecured debt is paid through the plan, see the articles in  The Chapter 13 Repayment Plan.)  

Keeping the Property: Continuing Payments Under the Contract

If you want to keep the property and continue paying the debt as before, you just need to say so in your plan. Your proposed plan will state that you intend to remain current on the contract during the life of theâ

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