Unsecured and Secured Debt

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While it seems like all debt should just be considered “debt,” it’s actually not considered that way in bankruptcy. Below we discuss unsecured and secured debt.

Unsecured and Secured Debt

Under Chapter 7 and Chapter 13 bankruptcy, debt is treated in one or two ways: as either unsecured debt or secured debt. Understanding the difference between the two is crucial because it will determine how and if a creditor is allowed to collect the debt.

Unsecured Debt

An Unsecured Debt is not associated with a specific piece of property, which means that there is not specific property that serves as collateral for the debt. This means that something (such as a car) cannot be seized to pay back the debt you owe. If you are unable to make a payment for unsecured debt, a creditor will not be able to take any property (or collateral). One exception to this is when a creditor decides to sue you in order to get the money back. In this case, a creditor would need to get a court judgement to take the money in some other form, for example, garnishing your wage.

Examples of unsecured debt include the following:

  • credit card charges
  • student loans
  • utility bills such as telephone and electric bills
  • medical bills
  • personal loans not requiring that you sign a security agreement before you obtain the card
  • court judgments that have not yet been enforced by garnishment or attachment
  • income taxes
  • back rent (this depends on the state you live in).

Secured Debt

A Secured Debt is associated with piece of property. The property can serve as collateral for the debt, which means that if you fail to make payments, a creditor is able to seize the property as a payment.

Examples of secured debt include:

  • mortgage
  • Home Equity Line of Credit
  • auto loan or boat loan

Working with a Bankruptcy Attorney

Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix business bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.

AZBK Lawyers

668 N. 44th St., Ste 320, Phoenix, AZ 85008

(602) 648-3274

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