Are payments on secured debts suspended in a Chapter 11 bankruptcy?

In Virginia, payments on secured debts are suspended in a Chapter 11 bankruptcy. When filing for Chapter 11, the debtor, or person filing for bankruptcy, is able to restructure their debts by creating a repayment plan with the creditors. This repayment plan is then submitted to the court for approval. Once approved, the debtor and creditor must abide by the terms of the repayment plan. During this repayment plan, payments on secured debts may be suspended, as the debtor attempts to slowly pay off the debt. Secured debt is a type of loan where the lender has some kind of security, such as a lien or a mortgage, over the property being borrowed against. Since the lender’s security gives them legal rights over the property being borrowed against, the bankruptcy process gives them a chance to recoup their losses. These losses may be recouped by holding the debtor responsible for repaying the debt and by suspending payments. However, it is important to note that even though payments are suspended during a Chapter 11 bankruptcy, the debt still exists and the creditor still holds legal rights to the property. If the debtor fails to abide by the terms of their repayment plan, the lender can take legal action against them. In Virginia, the court also has the ability to convert the bankruptcy process from Chapter 11 to Chapter 7, which would eliminate the repayment plan and immediately begin liquidating the debtor’s assets.

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