Q: If your car was repossessed in montana is it still considered a secure debt when filing chapter 7 bankruptcy?
The Bankruptcy Code provides that, once you file a bankruptcy case, you have the right to tender the return of the collateral in full satisfaction of the secured claim of the creditor's lien on that collateral (to the extent of the fair market value of the collateral on the filing date). Any remaining balance due upon that creditor's claim would be an unsecured claim.
That said, once the bankruptcy is filed, assuming the repo occurred shortly before the bankruptcy filing, and that the vehicle has not yet been sold by the creditor, a debtor can demand the return of the vehicle from the creditor. In that event, the creditor's claim is a secured claim, to the extent of the FMV of the vehicle. And a bankruptcy Discharge will not affect the creditor's vehicle lien, although any deficiency claim would be dischargeable.
A: No. A secured debt is a debt secured by the collateral in your possession. When the vehicle is repossessed by the Creditor, the collateral is in the Creditor's possession and the debt is no longer "secured."
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