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Can my secured debts be discharged in bankruptcy?

The simple answer is yes.  Secured debts will be discharged after bankruptcy.  However, be careful.  Remember that secured debt is debt backed by collateral.  Collateral is property the creditor is entitled to take if payments on the debt are missed.  The most common types of secured debts are home mortgages and car loans.

Bankruptcy cancels your personal legal responsibility to repay your debt, both secured and unsecured.  This means the secured creditor cannot take any action against you to collect that secured debt. 

However, the secured creditor CAN and almost always WILL take back their collateral if you don't pay the debt. 

Example #1:  You file for bankruptcy and you are behind on your home mortgage.  The mortgage owner or their agent can ask the bankruptcy court for permission to repossess your car or foreclose on you home.

Example #2:  Same situation, you file for bankruptcy and you are behind on your home mortgage.  The mortgage owner can also choose to wait until the bankruptcy case is over to begin foreclosure proceedings.

Either way, you will most likely lose your collateral if you fall behind on payments.  The only way to keep your property is by (1) catching up on the payments, (2) continuing to make them during and after the bankruptcy, and (3) maintining any required insurance.

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