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Secured and Unsecured Debt: A Basic Guide

Last updated 2 years ago

Bankruptcy is a federal court process that allows honest debtors to eliminate most of their debts or repay them under the protection of the bankruptcy court. While bankruptcy is a great way to provide yourself with a fresh financial start, it is important to understand that not all debts can be discharged. Read on for more information on secured versus unsecured debt and how these two classifications will affect your bankruptcy.

What is Secured Debt?

Secured debt refers to any type of debt linked to some type of property used as collateral in the event you default on the loan. The two types of secured loans include those that you agree to and those which you don’t. For example, mortgages, home equity loans, auto loans, and personal loans from finance companies all fall under the category of secured debt. Examples of non-consensual secured loans include money judgments made against you and tax liens.

What is Unsecured Debt?

An unsecured debt refers to those debts not secured by any of your property, meaning that your creditor has nothing to claim in the event you fail to make your monthly required payments. Examples of unsecured debts include credit cards, student loans, medical bills, rent, and utility payments.

Debts Dischargeable by Bankruptcy

Individuals who file for Chapter 7 Bankruptcy can discharge many of their debts through the process of liquidation, in which their non-exempt property assets are sold so that the proceeds can be used to satisfy the debt. This type of bankruptcy will discharge many types of unsecured debts including your credit card debt, medical bills, and personally guaranteed loans. However, secured debts such as your mortgage or car loan will not be discharged unless you are willing to give up the property.

Find out which type of bankruptcy is right for you based on your secured and unsecured debts by contacting Dixon & Johnston, P.C. at (618) 233-1103. With over 30 years of experience, our skilled bankruptcy and disability attorneys are your number one resource for high-quality legal representation in the Belleville area.


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