Secured Debt and Its Technicalities

  • Secured Assets

Secured Debt and Its Technicalities

Secured debt is the troublesome part during bankruptcy. There is a fear of foreclosure, lien and various other threats when it comes to secured loans. Whether opting for bankruptcy under Chapter 7 or under Chapter 13, there is a good percentage of risk with respect to the secured assets. To begin with, let’s understand secured debt. A secured debt is any debt that is backed up with collateral or an asset, which acts security for the lender. To know the meaning of more such technical terms and to understand them better, log on to https://bankruptcy.recoverylawgroup.com/. Home mortgage and car loans can be the best examples of secured debts.

What do you mean by voluntary liens?

Voluntary liens are something that has been created by choice instead of an order or request. While availing a home mortgage, you might get into an agreement, offering the lender rights to auction, use or dispose of your home in case you default or are unable to make regular pre-defined payments. This is referred to as voluntary lien. The same can be true for any other personal asset also apart from home and automobile. This lien is exercisable only to real property assets and is usually not used for intangible assets. The voluntary lien is usually specified in the mortgage deed or loan agreement.

What do you mean by involuntary liens?

Involuntary liens are liens which are created out of a judgment or a particular scenario. These are usually not mentioned in the deed or any agreement. As the owner or possessor of the asset, you might not be fully willing to opt for a lien and hence, this has been named as ‘involuntary lien’. Some of the examples for the same can be listed as follows-

  • Real estate/income tax liens by the state / federal or county jurisdictions
  • Mechanic’s lien
  • Judgment liens
  • In a few states, there is something called landlord liens

Lien Perfection by the creditor

In case of default or missed payments, one of the common things a creditor or lender might consider would be lien correction. The process of lien correction is to notify all interested parties, including the debtor, other lenders, courts, etc., about the lien on the asset. This is usually done through notice. The process varies based on the type of asset. Perfection can be essential when more than one lender grants loans on the same secured asset. The following list will help analyze the process based on the type of secured asset-

  • In case of a real property, the agreement or trust deed has to be registered in the local jurisdiction country or state where the real property is situated.
  • When the collateral or secured asset is a vehicle, a notification or change in title certificate has to be filed with the motor vehicle department of the state or country in order to perfect the lien
  • In case of other tangible assets like stocks, furniture, equipment, tools, etc., a financing statement has to be filed with state secretary.

Actions the lender or creditor can pursue

A lender can consider different options once the debtor has defaulted or missed several payments. Repossession of a secured asset is one of the options, however, it can be eligible only with respect to an automobile or similar class of assets. Breach of peace and privacy might not allow direct repossession of homes or houses. The lender might have to approach the court and get the judgment in favor to evict the debtor or repossess such an asset.

For homes and similar assets, there is an option of foreclosure. Majority of states do not require a judgment for foreclosing on an asset due to payment delays or defaults. However, you might want to check some of the states who require judgment for foreclosure especially a home mortgage. To get more assistance on this aspect and bankruptcy in general, reach out to some of the best lawyers in Dallas at 888-297-6203.


    2023-03-13T08:04:49+00:00