What are Secured Debts? How can creditors in New York collect on these type of Debts?

What are secured debts?

A secured debt is one which has collateral that secures the payment of the debt.  A ‘collateral’ is any property that is linked to a debt: the property gives the creditor security that if the debtor defaults on payments, he can take the property instead.

What is one example of a secured debt?

Car loan and a home mortgage are examples of secured debts.  Some people want to buy their own home but they do not have enough cash to cover the purchase price for a home.  They apply for a loan from a lending company or a bank. The lending company or bank will require that a mortgage contract be entered into between the person buying the home and the lending company.  The lender promises to lend the home buyer the money he needs to purchase the home and expects to be paid in monthly installments over a period of years provided that the home buyer agrees to one condition: if he fails to pay the monthly installments on the home loan, the lending company can take the debtor’s home.  In this case, the home is the collateral which secured the payment of the money debt.

 How can creditors lawfully collect on a debtor who has defaulted on payments?

The creditor who holds a secured debt usually sends the mortgage debtor notice that he has defaulted in payments.  The mortgage creditor will give the debtor a period within which to pay the mortgage in arrears and also to pay the mortgage amount in full.  Most mortgage contracts have what is called an acceleration clause which provides that if the debtor misses on payments, the entire loan becomes due immediately. When the period for payment has passed and still the debtor has not paid the arrears, the creditor can opt either to bring a suit in court so that he can take the property put up by the debtor as collateral and sell it so that he can get back the loaned amount.  Or, he can foreclose on the mortgage by sending the debtor a notice of foreclosure sale.  The creditor will sell the property so that the proceeds from the sale can be applied as payment for the debtor’s loan.

How can a lawyer help when faced with collection and/or foreclosure?

A foreclosure defense attorney can advise you of your rights in foreclosure proceedings. He can help you defend yourself against foreclosure.  He can give you advice on how you can save and keep the property you’ve put up as collateral.  A lawyer can also explain to you how petitioning for bankruptcy can help you save your property from foreclosure.

We at the Maxwell Law Firm PLLC, assist in client debt settlement, foreclosure defense, tax collection defense, filing for Chapter 7 and 13 bankruptcy, and mortgage home loan modifications. Contact us and speak to our competent and experienced New York Bankruptcy Attorney so that you can get the debt relief you are seeking. Please give us a call at 718-701-0095 to discuss your options.