Important Facts to Know About Secured and Unsecured Debt
There are many factors that can contribute to serious financial crisis for individuals, including the loss of a job, divorce, death of a spouse or contributing family member, and many others. People often find themselves in serious trouble if they incur significant amounts of debt and do not have the means to repay them. While many people can lay claim to debts including student loans, credit cards, mortgage loans, and others, they may be unaware of the different types of debt and their use in society.
Debts will typically fall into one of two basic categories: secured and unsecured. If a person is facing serious financial trouble and is no longer able to make regular payments on his or her debt, they may consider filing for bankruptcy for protection from their creditors. The Austin bankruptcy lawyers of Slater, Kennon & Pugh Ltd.LLP wish to bring you the following information about secured and unsecured debts to help you better understand your options if you are considering filing for bankruptcy.
What is the Difference between Secured and Unsecured Debt?
Unsecured debts are usually loans and lines of credit that are not directly linked to personal property and require no collateral to be held in case the borrower defaults on the loan. In many cases, the creditor can pursue payment of the debt through collection and negative marks on the individual's credit report, but they cannot pursue methods like repossession or foreclosure to ensure payment of the debt.
Unsecured debts usually include:
- Credit cards
- Utility payments
- Organization and club memberships
- Cash advances
- Medical bills
Secured debts usually include:
- Mortgage loans
- Automobile loans
- Home-equity loans
- Homeowner's association payments
If no collateral is required to secure the loan, the debt is usually referred to as an unsecured debt. If a line of credit is directly linked to tangible property like cars, homes, and items that can be repossessed if the borrower defaults on the debt it is likely a secured debt. Secured debts also may be debts that require cash or other items to be put up as “collateral” in case the borrower defaults on the loan. If you are considering filing for bankruptcy, an Austin bankruptcy attorney can help you determine what category your debts fall into.
How Debts Affect Your Bankruptcy Case
When considering bankruptcy, it is important for individuals to organize their finances and make a thorough list of all of their debts and assets. An experienced Austin bankruptcy attorney can help explain your legal options and help you determine which type of bankruptcy will be the best fit for you.
- The type and amount of personal debts
- The individual or couple's income in relation to the median income for their state
- Whether or not they wish to retain their assets or wish to liquidate assets to pay debts
- What type of assets they have that may be liquidated
It is important to note that if you are attempting to discharge debts through Chapter 7 bankruptcy, there are certain types of debts that will not be dismissed. These include debts like tax liabilities, student loans, spousal support, child support, and other financial responsibilities.
If you are considering filing for bankruptcy and wish to know more about secured and unsecured debt, an Austin bankruptcy lawyer can help explain your legal options. For assistance with your case, contact the experienced Austin bankruptcy lawyers from Slater, Kennon & Pugh Ltd.LLP at 512-338-1100 today.