How are secured creditors dealt with in a chapter 7 case?
March 28, 2008
Secured creditors are creditors with valid mortgages or liens against property of the debtor. Property of the debtor that is encumbered by a valid mortgage or lien is called secured property. A secured creditor is usually per-mired to repossess or foreclose its secured property, unless the value of the secured property greatly exceeds the amount owed to the creditor. The claim of a secured creditor is called a secured claim and secured claims must be collected from or enforced against secured property. Secured claims are not paid by the trustee. A secured creditor must prove the validity of its mortgage or lien and obtain a court order before repossessing or foreclosing on secured property. The debtor should not turn any property over to a secured creditor until a court order has been obtained. The debtor may be permitted to retain or redeem certain types of secured personal property (see Question 28, below).
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