Secured Debt Solutions

Secured debts have collateral ties. For instance, your mortgage is secured by your house and your car secures your auto loan. Consequently, if you don't pay, the lender can collect the security by repossession or foreclosure. If you're having trouble keeping up with monthly payments, you can take steps to prevent the loss of your property.

Negotiation

If you fall behind on secured debts, your lender has the legal right to take the property back. Some lenders, particularly mortgage lenders, may be willing to work with you to avoid this: Foreclosure costs time and money, and your lender may agree to strike a deal -- a lower interest rate or a few months with no payments, for instance -- if you can show that the delinquency wasn't your fault. The federal Making Home Affordable program offers incentives for lenders to work with you.

Outside Assistance

Any number of firms will offer to work with you when your debts are more than you can handle. Services range from advice on money management to companies that offer to negotiate with lenders on your behalf. Credit counselors and debt-management companies can be a help, but some are scam artists. Before you sign up for any service, find out the costs and conditions; if the company offers to negotiate, find out how long it will take them to make your creditors an offer and how much they expect to save you.

Chapter 13

Chapter 13 bankruptcy can't wipe out a secured debt. If you're behind in payments, however, Chapter 13 allows you to work out a plan for making up the delinquent debt, provided you can cover current payments as well. You'll have more money to spend on your secured debts because bankruptcy law makes them a priority: Unsecured creditors will have to settle whatever you can pay after your living expenses and secured debts are taken care of.

Walk Away

Sometimes giving up makes better financial sense than trying to hang on to the collateral. If you can't afford your car payments, for example, selling it may be a smarter move than waiting for the repo men to take it. If your lender will agree to let you turn over the deed to your house in payment of the mortgage, or allow you to try and find a buyer, that might also be a better solution than trying to hang on.