In this fast-paced world, it’s almost impossible to go through life without incurring debt. From mortgages to car loans and credit card debt, many areas of a consumer’s financial life involve borrowing. While it’s obvious that borrowers directly gain from loans, it can be difficult to understand how lenders benefit outside of the amount they gather from interest. Understanding the full lending process is an important part of financial management, including knowing when you should file for bankruptcy because of those loans. With the help of Behm Law Group, Ltd., you can determine if, when, and how you should file for bankruptcy in Marshall, MN.
While the primary reason lenders supply loans to consumers is the percentage of interest gained in the period it takes those borrowers to repay them, they can also benefit from holding secured collateral on a debt. This collateral usually manifests as some item of property that acts as security for the lender and provides the lender the opportunity to offer better rates and sign with more customers. If you enter into an agreement with a lender on a loan with secured collateral, you have incurred a secured debt.
Secured debts always involve properties that act as security or collateral. Common secured debts include mortgages, car loans, and loans for work equipment, appliances, or luxury items. Lenders generally secure debt with the implementation of a lien, either voluntary or involuntary.
Voluntary: This is the most common form of a lien lenders will place on a secured loan. Often these liens are written into the initial contract you sign to close the agreement and allows secured creditors such as mortgage providers to foreclose on your home if you can’t make monthly home payments. Voluntary liens can also be imposed on personal properties such as tools, work equipment, furniture, and inventory.
Involuntary: Lenders can also impose involuntary liens as security interest by going through the court system. These options take forms similar to lawsuits and are usually put into place as judgment liens, but occasionally can include income tax liens, mechanic’s liens, and landlord’s liens.
Liens, either voluntary or involuntary, work to protect a creditor’s right to repayment. In the event a debtor defaults, the creditor can repossess the secured property, foreclose a home, or file court action. If a debtor chooses to file for bankruptcy, a secured creditor is protected and most likely guaranteed some repayment in the process. At a minimum, the secured creditor would receive the collateral securing its lien which the creditor would auction off and use the sale proceeds to pay off some of the underlying debt.
If you’re struggling to meet debt payments on any of your debts, secured or otherwise, contact Behm Law Group, Ltd. today at (507) 387-7200 to learn more about filing for bankruptcy in Marshall, MN.
