Author Question: The perception of secured loans may not always be a positive one. What are some of the advantages ... (Read 62 times)

HCHenry · **on:** Aug 2, 2018

The perception of secured loans may not always be a positive one. What are some of the advantages associated with an individual obtaining a secured loan versus an unsecured loan?

What will be an ideal response?

Question 2

What is an executory contract? How does the trustee handle these types of contracts in a bankruptcy case? In other words, what power does the trustee have with regard to this type of contract and what factors does the trustee consider when deciding how to treat this type of contract?

What will be an ideal response?

orangecrush · **Reply #1 on:** Aug 2, 2018

Answer to Question 1

The need for secured loans has, at times, been a topic for debate. Those opposed to secured loans argue that the terms of the loans along with the right of the creditor to repossess or foreclose on the collateral cause undue hardship for the debtor. Proponents of secured loans point out that secured loans on cars, household goods, and homes provide the debtor with several advantages, including more lenient purchase terms, lower prices, and lower interest rates. These types of loans also benefit the creditor in that they lower the risk of nonpayment on the loan. The interest rates on most unsecured credit cards are exorbitant compared to the interest rates on mortgage loans and car loans as of late.

Answer to Question 2

Bankruptcy Code 11 U.S.C. 3659(a) empowers the trustee either to affirm or reject contracts and leases the debtor enters into that have not been completed. The generally accepted definition of an executory contract is one in which there has been insufficient or incomplete performance of the contract, thus rendering a material breach by either party. The trustee may deem it proper to reject a contract if he or she determines it is in the best interests of the debtor to do so. The bankruptcy court treats the rejected contract as if it were breached prior to filing the petition, and any remaining balance owed to the other contracting party, e.g., the lessor, will be treated as a general unsecured claim in the bankruptcy case.