Bankruptcy

It's not for everyone

There are many alternatives to bankruptcy and they should be explored before making your decision. This is why at Marc R. Tow & Associates we make sure to educate our clients before moving forward with their case.

Business Solutions

Turn your business around

Filing for bankruptcy is not the appropriate business decision for every financially troubled entity. Marc R. Tow & Associates has decades of experience providing comprehensive solutions to resolving business insolvency.

Debt Settlement

A simple process

We offer a program wherein we negotiate with your creditors/CA in order to settle the debt for less than what you owe. We charge an upfront fee that can be paid through a payment plan if you wish.

Frequenty Asked Questions about Secured & Unsecured Creditors

Q. What makes a creditor secured?
A. Secured creditors possess specific legal rights to take back ownership of an asset should the debtor default on the corresponding security agreement. In plain English this means when you get a secured loan you promise if you do not pay what you owe the creditor can take a physical thing of value from you to help repay the original debt.

Q. How do they obtain these rights?
A. Most times the debtor grants them in consideration for the creditor giving them a loan to purchase the asset.

Q. Can you give some examples?
A. The mortgage holder on a house, a lien-holder on a car, a commercial loan secured by the inventory and receivables of a business.

Q. Is there a way for a creditor to obtain secured rights without the debtor's permission?
A. Yes, there are Mechanic's liens for creditors who have done work to a vehicle or property and governmental tax liens. Also, the courts can grant any creditor an attachment pending a trial or an execution after a judgment has been awarded. When recorded properly at the registry of deeds these vest secured rights in the creditor which may give the creditor even more rights than a mortgage holder.

Q. How can they get more rights?
A. Mortgages usually secure only a single asset, an attachment or execution can encumber every property owned by a debtor recorded at the registry of deeds where the attachment or execution is recorded. The creditor may gain even more rights by recording at more than one registry. Fortunately for the debtor, attachments and executions usually end up in a low priority position.

Q. What does priority position mean?
A. I like to describe priorities as a line. Imagine when you sell your house the buyer puts a pile of cash on the closing attorney's desk. Then everyone who wants any of it lines up in a specific order called "priority".

Q. How would this work in a normal setting?
A. First in line comes the city or town for municipal taxes. Next steps up the first mortgage holder followed by the second mortgage holder, if any.

Q. My home equity loan is really a second mortgage, right?
A. Yes, most of the time that will be the case.

Q. What about my equity in the house?
A. The homeowner stands at the end of the line. Any money left when it's your turn goes to you.

Q. How does this change with attachments, executions and tax leins?
A. As these things happen the secured creditors basically just get in the line.

Q. Does it matter how much they are owed?
A. Not for priority, it's first come first served.

Q. What if there won't be any money left for me?
A. Then you no longer have equity in the house.

Q. What if more creditors join the line after there is already no equity?
A. They have obtained a position with little or no value. When the money pile has been fully distributed anyone left in line gets nothing. The person in line when it runs out might not be paid in full.

Q. Does the rest of the debt go away?
A. Absolutely not. Once the security for the debt goes away it just becomes unsecured debt.

Q. Where do the unsecured creditors stand in this line.
A. They don't, unsecured creditors have no right to be in line, that's essentially the difference between secured and unsecured creditors.

Q. Can creditors stop me from selling my house if they will not be paid in full at the closing?
A. In theory yes. Your new buyer needs clean title to the property. If a secured creditor does not want to release their position for a partial payment they can hold up the sale. For cases where a secured creditor will get zero they can get even more stubborn. This situation even comes up frequently in cases with only one mortgage where the home sells for less than the outstanding mortgage. In cases like these you may want a professional mortgage negotiator to set up a short sale or a deed in lieu of foreclosure.

Q. How do unsecured creditors get paid?
A. Either by you paying them voluntarily or by court order. Remember, unsecured creditors may also gain secured rights through the courts.

Q. What about the threats from the collection agencies?
A. They are exactly that, threats. Only a lawyer can back them up. If you would like to enter into a payment plan sometimes these agencies can be helpful. If you can not enter into a plan their only choice is to go away or pass the case on to an attorney for the creditor.

Q. Can they still call me?
A. So long as it doesn't become harassment they may call occasionally to check on your status. One of the bonuses of your hiring an attorney or debt settlement company is that you just tell the agency once to call your representative instead and you'll never get a call from them again, it will be your lawyer's or debt negotiator's job to field their calls.

Q. What are some examples of unsecured debt?
A. Most credit cards, debts to stores and money owed for services.

Q. Can some credit card debt be secured?
A. If the card was secured by a savings account then the debt is secured up to the amount of the savings. Sears card holders should make special note that Sears will consider major purchases such as appliances and computers secured transactions under the terms of their credit agreement. I have seen them go as far as claiming old tires and car batteries as secured.

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