Fort Lauderdale Secured Debt Attorneys

Experienced Attorneys Assisting Businesses

Bankruptcy does not have to be synonymous with business failure. When a company has encountered financial trouble and needs a fresh start, bankruptcy can sometimes be used as a tool to achieve that result. The attorneys at Stok Kon + Braverman can assist businesses with handling the intricacies of these proceedings, including management of secured debt.

Bankruptcy & Secured Debt

A secured debt is a debt that is backed by some form of collateral. The collateral is usually either real or personal property, such as a car or a house. If the debtor defaults on the loan, the creditor will generally seize the collateral, sell it, and use the proceeds to pay down the amount still owed by the debtor.

Secured Debt Surrendered

When a business files for Chapter 7 bankruptcy, there are a few different options regarding disposing of the business’ secured debt. First, the business’ debts can be surrendered. This means that whatever collateral that was being used to back the debt is taken from the debtor and the company no longer has possession or control over it. The bankruptcy trustee then auctions off the collateral and uses the proceeds from the auction to pay down the debt that was owed to the creditor.

Secured Debt Reaffirmed

A second outcome for secured debt is that the debt is reaffirmed. This means the debt survives the bankruptcy proceedings and the debtor still pays on the property just as it did before filing for bankruptcy. However, with a reaffirmed secured debt, if the debtor should default on payment of the loan, the creditor can seize that piece of property and sell it for proceeds to go toward repayment of the debt. Additionally, if the proceeds from the sale of the collateral are less than the amount that the debtor owes to the creditor, the debtor would still be responsible for paying the difference. To reaffirm a debt, a debtor must state so in writing and file a notice of reaffirmation with bankruptcy court.