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Secured debts and liens
Secured claim
A secured claim is a creditor's claim backed by a lien on property. In bankruptcy it is a secured claim only up to the value of the creditor's interest in that property, and an unsecured claim for any amount above that value. 1
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The federal courts' glossary describes secured debt as debt backed by a mortgage, pledge of collateral or other lien, with home mortgages, auto loans and tax liens as examples. The creditor holding the lien is a secured creditor, and the property is the collateral. 2
The split matters when collateral is worth less than the debt, which the courts call an undersecured claim. The part matched by the property's value is secured, and the rest is unsecured. 1 2
For an individual in Chapter 7 or Chapter 13, personal property that secures a claim is valued at its replacement value on the filing date, with no deduction for costs of sale or marketing. 1
In Chapter 13, a debtor who wants to keep the collateral must propose a plan under which the holder of the secured claim receives at least the value of the collateral. For a debt that was used to buy the collateral, such as a car loan, and was taken on within certain time frames before filing, the plan must provide for full payment of the debt. 3
Common questions
Can one loan be partly secured and partly unsecured?
Yes. When the collateral is worth less than the amount owed, the claim is secured up to the value of the collateral and unsecured for the rest. 1
What happens to a secured claim after a discharge?
Can a claim be secured without a lien?
Yes, through setoff. A claim that the creditor can offset against money it owes the debtor is secured to the extent of the amount subject to setoff, and unsecured for the rest. 1
Sources
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