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
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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