Can Creditors Repossess Or Foreclose On Property After A Bankruptcy Is Discharged?
By Susanne Robicsek, North Carolina Bankruptcy Attorney on Dec 1, 2008 in General Bankruptcy Information
Many people file for bankruptcy and keep their homes and cars. However creditors may sell property after a bankruptcy discharge is granted via repossession or foreclosure if a default under state law has been triggered allowing the sale of collateral for the loan.
When someone files for bankruptcy, they don’t get to keep their houses or cars without paying for them. While the underlying debt obligation to pay is discharged, the creditor retains the right to pursue the collateral if the debt is not paid or a default occurs.
There are two types of debts: secured and unsecured. Secured debts have collateral, and unsecured debts don’t. Mortgages and car loans are two very common types of secured debts. The creditor took extra steps to reduce the risk of the loan by taking collateral for the loan - a lien on a house, car or other property. For these loans, there are two components: 1) a promise to pay the debt and 2) a right to sell particular property if the promise is not kept. This right to the property survives bankruptcy discharge.
If someone is in default of the loan, the right to sell the property is triggered. Laws vary so it is very important that you seek the advice of a local bankruptcy attorney to know if the filing of bankruptcy will be a default in your state. If someone does not keep the loan current, the creditor’s only remedy may to foreclose or repossess the property. In fact that may be the only way that a creditor can get title to the property so that they can sell it.
In some areas, the filing of the bankruptcy filing alone is breach and will trigger a default that will allow the creditor to go after the property even though no payments were missed. In other states, bankruptcy filing alone may not give grounds for a creditor to go after the property.
This may also depend on the type of loan - for instance a car may require reaffirmation but a reaffirmation for mortgage may not be advised. However rest assured that bankruptcy attorneys are familiar with the local custom and can guide you through the best way to file for bankruptcy and keep your car or home if that is what you want. Seek help from an experienced bankruptcy lawyer near you to get the facts about your property.
by Susanne Robicsek, Charlotte NC bankruptcy lawyer
See also: Why Home Loans are not Reaffirmed by Michael Doan San Diego Bankruptcy Lawyer
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