In Bankruptcy, What's the Difference Between Secured and Unsecured Debt?

Aug. 15, 2010 - PRLog -- When talking about bankruptcy, it is impossible to go through a conversation without mentioning secured and unsecured debt. Attorneys and people who are familiar with bankruptcy use these words and treat them as ordinary words. Although for those of you who are not bankruptcy experts this will clear up any misunderstanding you may have involving the two types of debt we all have.

Secured debt is a loan. A creditor will lend you money and will take a security interest in the item of collateral or property. For most of us, the collateral typically takes the form of a home or an automobile. But any loan can be secured as long as the creditor obtains and perfects a security interest in the collateral. The most troubling thing about secured debt is the creditor’s remedies for missed payments and defaults. A secured creditor has the option to take back the property, either in the form of repossession or a foreclosure. After the creditor “takes” the property they then may have the ability to obtain any deficiency there may have been after the repossession or foreclosure. While secured debt cannot be discharged in a bankruptcy, an experienced bankruptcy attorney deals with creditors all the time and are usually in a better position to negotiate with creditors than an individual not represented by an attorney.

Unsecured debt is formed similarly. Unsecured debt arises via a contract between you and a creditor. Unsecured debt however is not tied to a security agreement and does not allow the creditor the same remedies available to a secured creditor. A debtor merely promises to pay back the money borrowed from an unsecured creditor. The most common examples of unsecured debt are credit card debt, medical bills, personal loans, etc. The only option an unsecured creditor has is to seek legal action in recovering the money loaned to a debtor. Unsecured debt is discharged in a bankruptcy.

For more information visit http://www.floridabankrupcy.us or call us directly. Here is another bankruptcy article http://www.prlog.org/10861127-bankruptcy-life-after-itwha... and here is another http://www.prlog.org/10861124-bankruptcy-should-you-file-... for your reading enjoyment.

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