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The two most basic forms of debt in Halifax are secured and unsecured.
Secured debt is that which is secured by an asset. For example, the mortgage on your home is a secured debt as it is secured by a charge, lien, or encumbrance on your home. If you sell the home, the mortgage gets paid before you receive any of the money. Car loans also fall under this category.
All other loans are considered unsecured debts.
A good example of an unsecured debt is a bank or department store credit card. There are no liens registered on each item that you purchase with your credit card.
This sometimes confuses people because they tend to assume if they go bankrupt, the credit card company can take back whatever they had purchased with the credit card. Generally this will not happen.
However, if you make a new purchase on your credit card the day before filing for bankruptcy, the credit card company will presume you have committed fraud, and will demand full payment for that item. The item is still not counted as a secured debt though.
Secured debts are not automatically discharged in a bankruptcy. Therefore, if you want to keep your house, you will need to continue paying the mortgage. If you choose to surrender your house to the bank, they will sell the house and repay the mortgage. Then, any resulting shortfall will be included in your bankruptcy.
If you have any questions about what classifies as a secured or unsecured debt, please contact us today. Our licensed bankruptcy trustees in Halifax can help you sort out your assets before you file for bankruptcy.
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