What happens to secured debts in a Chapter 7 Bankruptcy?

In Chapter 7 Bankruptcy law in Washington, a secured debt is a loan that is secured by collateral, such as a car loan or a mortgage. When filing for Chapter 7 bankruptcy, a debtor has the option to surrender the collateral in return for a discharge of the debt. This means that the creditor will reclaim the collateral and the debt will no longer be owed. Alternatively, the debtor may choose to keep the collateral and continue to make payments on the loan. In this case, the debt will remain part of the bankruptcy estate, and the creditor must continue to receive payments in order to retain their collateral. Additionally, secured debts cannot be discharged by a Chapter 7 Bankruptcy. That means that even if the collateral is surrendered, the debt remains and the creditor can sue the debtor to collect the debt. Finally, it is important to note that in some cases, filing for Chapter 7 bankruptcy may not stop foreclosure proceedings for a home or repossession of a vehicle. In these situations, the creditor may still be able to take possession of the collateral, even if the debt is discharged.

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What happens to secured debts in a Chapter 7 Bankruptcy?

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