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Coverage by Collateral

When seeking a loan, many debtors use collateral in order to secure a loan. Collateral can best be understood as any “real property” that can stand in place of money owed, allowing a lender to have a measure of security in making the loan. However, should a debtor not be able to make their payments on a loan, the lender can receive ownership of this collateral, which take many different forms and will vary based on the individual and the amount of debt involved.

Ownership for Collateral Option

In order for collateral to stand in place of a debt, the debtor must have ownership over the item that is used as collateral. “Real property” can mean land or vehicles, but it also refers to several other forms of ownership that might be used in collateral negotiations. These types of ownership include:

  • Outright ownership, or fee simple
  • Contingent interests, or ownership dependent on conditions beyond your control
  • Future interest, or ownership based on future conditions
  • Life estate, or ownership only during your lifetime
  • Lienholder, or ownership based on a lien or mortgage, not the property proper

These types of ownership might be used as collateral for certain loans or debts. However, if your debt becomes unmanageable, dealing with loans that have collateral backing can make the process more complicated to handle alone.

Contact Us

If you or a loved one is considering filing for bankruptcy in order to address your debts, including collateral-based debts, get the guidance you need from our attorneys at the Russell Van Beustring P.C.. Call 713-973-6650 to better understand your legal position and options for settling your debts.


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