In this weekly column Mark Schneider and Daniel Cuppett, the lawyers from the Law Office of Mark Schneider, answer legal questions sent in by readers of the Clinton County Free Trader Today and the North Countryman. Q: How do I know if a debt is secured or unsecured?
A: A debt is secured is the creditor has the legal right to take back some real or personal property if the debt is not paid. The most typical secured debts are homes with a mortgage or cars with a security interest. In other words, if you dont stay paid up on your mortgage, the bank can go to court and take your house. If you do not stay paid up on a car, then the bank can repossess it without going to court (because you sign a contract allowing them to do this when you finance a car). If you go through bankruptcy, you do not legally owe the money to your creditor on the secured loan. However, the creditor can always take back the secured property (after the automatic stay expires or if the creditor lifts the automatic stay). Q: What is the automatic stay in bankruptcy?
A: When you file a bankruptcy petition with the Bankruptcy Court, all collections against your are automatically stopped or stayed in legalese. Any foreclosures actions, repossessions, wage garnishments, attachments of bank accounts, collection letter or phone calls have to stop as soon as the creditor receives the Notice of Bankruptcy issued by the court. This is done so that the Bankruptcy Trustee (who is appointed by the Court to represent your unsecured creditors) can collect any non-exempt assets of the bankruptcy estate and distribute them to the unsecured creditors in an orderly manner. In most Chapter 7 cases that our office files, there are no non-exempt assets, so the Trustee does not collect any money or assets from my clients. Once the debts are discharged (about three to four months after filing the petition), the unsecured debts no longer exist. If there any secured debts, only then can the creditors can proceed with the foreclosure or repossession.