First of all, let's define what qualifies as a secured debt. A secured debt is a debt backed or secured by collateral, such as your vehicle loan or mortgage. In a Chapter 7 bankruptcy, you generally have three options on how to handle secured debts: surrender, redeem, and reaffirm. Surrendering a secured debt simply means that you will surrender the property that is securing the loan back to the creditor. For example, you would abandon your house and surrender it back to the lender if you were choosing this option pertaining to your mortgage. The creditor will generally not be able to pursue a debtor for the outstanding amount due under that debt. Redeeming the debt simply means paying off the amount owed on the secured property. So, if you owe $10,000 on your current vehicle loan, you can always tender $10,000 to the creditor of that property in order to redeem the debt. Finally, you can also reaffirm the debt. This requires you signing additional documentation with the creditor and you are essentially committing to the debt again. This means that the debt will not be discharged throughout the bankruptcy proceeding and you will still be liable for the amount owed to the creditor, but you will also maintain possession of the secured property. If you have any questions, contact our bankruptcy lawyers to learn more about your options in a Chapter 7 bankruptcy.
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