Secured vs. Unsecured Debt

It is important for those who are considering taking out a loan to understand the types of debt they may accrue through this process. Should you for some reason default on a payment, you need to be aware of the consequences. The consequences of your failure to pay may vary depending on the type of debt you owe. In particular, secured and unsecured debts may be considered differently when an individual files for bankruptcy. Depending on the type of bankruptcy for which one opts to file, one’s secured debts may not be discharged.

What is Secured Debt?

Loans that are backed by some sort of material property are considered to be secure. Because the debts associated with these loans are linked to property that you own, failure to meet monthly payments may result in the creditor taking away your possessions.

Typically, secured debt is accrued through the purchase of large, expensive items. Home mortgages are prime examples of secured debt; if you fail to meet payments, then the bank will claim your home. Cars are another example of secured debt. Failure to make payments will result in the repossession of your vehicle.

What is Unsecured Debt?

Unsecured debts are those that are not backed by any sort of collateral. Typically, credit cards will be unsecured, although some (such as prepaid cards) are not. Medical bills and some student loans are other examples of unsecured debt, since no property is linked to these payments. Lenders cannot claim any of your property if you fail to pay back the money you owe on these debts.

Contact Us

If you have any questions about secured and unsecured debt, then the Austin bankruptcy lawyers of Slater, Kennon & Pugh Ltd.LLP can help you. Please contact our offices today at 512-338-1100 to speak with one of our experienced lawyers about your concerns.