Secured Creditors - Bankruptcy Canada
How are Secured Creditors Impacted By Bankruptcy?
As you probably know, there are different types of debt, each with their own unique features.
Broken into unsecured, revolving, and secured debt, the risk and virtues of each type flesh out your financial portfolio and can, when properly managed, offer you an optimal credit profile.
Secured creditors are those that take an asset of yours as collateral against your loan amount.
The two most common types of secured loans are car loans and mortgages for homes.
In these situations, the product being loaned is the collateral for the loan itself.
In these situations, if you default on the loan terms, the creditor has the right to repossess the asset against the amount owing.
Secured Credit & Bankruptcy
Bear in mind that in the situation where you go bankrupt while still in possession of secured loans, this does not remove the creditor’s legal right to the asset.
This means that, even if you are insolvent and undergo the legal bankruptcy proceedings, you still must make your monthly payments.
If you default, then they can still seize the asset.
Some choose to downsize in the event of bankruptcy, meaning they forego the asset (and thereby the loan) to mitigate the amount they must pay.
However, if you need to retain the asset – such as a home or vehicle for work and living purposes – you must continue to pay.
This can be arranged, provided at the time of your proposal or bankruptcy filings, your payments are current and your loan is in good standing.
If you are looking into consumer proposals or bankruptcy and want to find out how it will impact your secured creditors, reach out to a financial counsellor.
There, you can obtain objective, no-cost advice on how to best proceed with your accounts to give you the best quality of life while you manage your debt.