How Are Secured Debts Treated In Personal Bankruptcy or a Consumer Proposal?

Updated:  March 1, 2022

The majority of consumers who file personal bankruptcy or a consumer proposal have secured loans such as a mortgage, vehicle or investment loan. These loans allow the lender to take back the asset should the borrower default on the loan payments.

When you file personal bankruptcy or a consumer proposal, these loans are not always impacted. You can keep these assets as long as the loan payments are current and stay current, and payments are made in accordance with the credit agreement.

However, if you do not wish to keep the asset, you can choose to walk away from the asset and allow the secured creditor to take possession of it. If there is debt after the lender sells the asset, the debt will be included as an unsecured debt in the bankruptcy or consumer proposal.

Lenders also secure a loan by having a third party co-sign for the debt. If the borrower decides to file bankruptcy or file a consumer proposal, the lender can no longer collect from the borrow; however, they still have the legal right to pursue the co-signer. Knowing which debts will be released in a consumer proposal or bankruptcy is very important and paramount to which option you choose.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. We can also help you stop collection calls. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.