Consumer Bankruptcy Journal Summer 2017 - Page 12

Secured Debts: What Are They? By Cathy Moran, Esq. Moran Law Group Mount View, California This article first appeared at http:// www.bankruptcysoapbox.com/ W hether a debt is secured or unsecured is one of the basic questions in bankruptcy law. To determine whether an individual is eligible for Chapter 13, you have to know the total of the secured debt. To know what rights a creditor may have in the debtor’s property in any chapter, you have to know whether the creditor has a lien (that is, whether the creditor is secured). So, what debts are secured by a lien? Consensual liens Some secured debts are familiar: home mortgages, home equity lines of credit and car loans. These are all liens created by agreement between the debtor and the creditor and are embodied in some sort of written legal agreement. Purchase money security interests These security interest are lien rights that the seller retains in the goods purchased when the seller finances the purchase. The lien can be created by a specific 12 CONSUMER BANKRUPTCY JOURNAL written agreement or may arise when the item is financed on the seller’s revolving credit plan or store credit card. This kind of lien does not have to be perfected by the usual filing of a UCC financing statement. In theory, if the buyer discharges his personal liability on the debt through bankruptcy, the seller retains the right to reclaim the goods. The usual Sears, Good Guys, Circuit City and Zales credit plans give the seller a security interest in the goods purchased. Contrast: If you buy the same goods using a Visa or MasterCard (credit provided by a lender oth