What Happens If You Default on a Secured Debt?
If you default on a secured debt or loan, secured debt creditors may take a variety of enforcement actions and seek court orders enabling them to take some control of your assets, including:
- Foreclosure or seizure on the asset they hold as collateral
- A writ of possession
- A mechanic’s lien (for creditors who have done work on a vehicle or your property)
- A tax lien (for the federal government in cases of unpaid tax debt)
When creditors seize an asset used to secure a debt, the amount received at a forced sale is applied to the overall amount of the debt. If the amount of your debt is greater than the value of the asset, which is most often the case, you are responsible for the remaining amount owed. This remaining amount is an unsecured debt on which you can be sued.
In almost every case, a home equity loan is just another name for a second mortgage, a common type of secured debt. Defaulting on a home equity loan can result in the foreclosure of your house. In today’s real estate market, you may be left with substantial debt even after your house has been sold. Our Los Angeles bankruptcy attorneys may be able to renegotiate your mortgage, as we have done for countless other clients. We can often help reduce interest rates and your monthly payment, as well as defer payments and reduce the principal.
Our bankruptcy attorneys are on your side. If creditors are threatening you or you are concerned about protecting your assets through bankruptcy, contact us as soon as possible for the peace of mind you deserve.