Secured Debts & Schedule D
The debtor's secured debts are listed on Schedule D. It is important that the debtor makes the correct connection between the secured creditor listed on bankruptcy Schedule D and the property that secures the loan, which is located on Schedule A/B (real estate and personal property). Secured debts can include:
- Mortgage loans
- Federal and state tax liens
- Civil judgments
- Purchase money security interests
- Vendor lien deeds (also known as land contracts)
- Automobile loans
- Personal property loans for furniture and appliances
The value of the security listed on Schedule A/B is subtracted from the amount of the secured debt to obtain a figure for equity in the property securing the loan. The debtor must then claim the appropriate exemption on the equity in the secured property. If the equity in the secured property exceeds the available exemption, the debtor must be aware that the property can be sold in a Chapter 7 case to pay creditors, and will be used in full or in part to determine the amount paid to priority and general unsecured creditors in a Chapter 13 case.
Completing Schedule D
To properly complete Schedule D, the debtor must provide his or her attorney with a current statement for the claim and a copy of the original loan documents. They should not assume that a loan such as a car or mortgage loan is owed by both spouses in a joint case. Liability for debts should be determined by the attorney examining the documents that establish the secured loan. (Both the Promissory Note and the Security Agreement.)
When the proper due diligence is applied to the preparation of the debtor's bankruptcy schedules, then it should be clear before the filing of the case what, if any, property will be lost to liquidation sale by the Chapter 7 trustee. In the context of Chapter 13, an objection to confirmation of the debtor's plan or a request for an increase in the debtor's plan payment can be avoided by accurately determining the amount of equity in the debtor's property. Again, this can only be accomplished by providing your bankruptcy attorney with complete and accurate information, and copies of the promissory notes and security agreements for your secured debts.
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