There are two major types of debt—secured and unsecured debt. It’s important to understand the difference between secured and unsecured debts when taking out a loan and when repaying debts. If you’re considering filing for bankruptcy, it’s also important to understand the different types of debts that can be discharged.
What Are Secured Debts?
Secured debt is a loan in which the borrower pledges some assets as collateral for the loan. This type of debt is essentially more “secured” for creditors because they can reclaim assets if the debt isn’t paid. Lenders place a lien on the asset, giving them the right to seize it if you’re unable to pay back the loan. If the lender takes the asset, it will most likely be sold at an auction. Common types of secured debts include mortgage and auto loans.
What Are Unsecured Debts?
On the other hand, unsecured debts don’t give lenders the right to any collateral for the debt. So, if you fall behind on payments, they can’t claim your assets to repay your debt the way they can with secured debts.
Since lenders can’t seize assets with unsecured debts, they often find different avenues to obtain payments. Often times, lenders hire debt collectors to get you to pay debts. They can also sue the borrower and ask the court to garnish your wages, take assets, or put a lien on your assets until the debt is paid off.
Experienced Queens Bankruptcy Attorneys
If you’re dealing with overwhelming debt, filing for bankruptcy may be the path to financial freedom. If you have unsecured debt, there are various bankruptcy options that can eliminate creditor harassment and can alleviate your liabilities. Our team at Law Office of Seni Popat, P.C. has been helping families throughout Queens become debt-free. Our team has the knowledge, experience, and skills needed to help you.
Get in touch with our Queens bankruptcy lawyers today at (718) 340-3385 to schedule a virtual consultation!