Debt and Collateral
Collateral is the asset that a person uses to back a loan that they are given. That loan then becomes known as a secured debt. In the event that a debtor does not pay back this debt monetarily, the real property that is the collateral can be collected by the creditor in place of that monetary debt.
Understanding Real Property
Real property can include assets other than land or vehicles, though these items are often used as collateral. The most important aspect of using property as collateral for a loan is that the person taking out the loan owns the property. There are various types of ownership when it comes to real property, including:
- Lienholders – owning a lien or mortgage (rather than property)
- Future interest – ownership in the future
- Life estate ownership – available during your lifetime
- Contingent interest – conditions must apply for ownership
- Outright ownership / fee simple
When a person has secured debts, or those where they use property that they own in one of the above manners to back a loan, and chooses to file for bankruptcy, their secured debts will take priority over unsecured debts that they may also have.
Facing financial troubles can be daunting, especially if you’re unsure of your current plan for handling debt. But the attorneys at the Bradford Law Offices, PLLC, can offer you individualized bankruptcy advice and assistance, making this time easier for you and your loved ones. Call 919-758-8879 to talk about your financial circumstances and how we can help you get back on your feet financially.