Types of Debt

There are two types of debt – secured and unsecured. If you have pledged property as collateral for a loan, the loan is called a secured debt. Examples of secured debt include homes loans and car loans. The loan is secured by the car or home, which means that the person you owe the debt to can repossess the car or foreclose on the home if you fail to pay the debt. Also, if you have a court judgment against you and there is a lien on your home, that may be considered a secured debt.

Unsecured debts are those debts for which collateral has not been pledged. Unsecured debts include medical debts and most credit card debts. Unsecured debt is generally wiped out by a Chapter 7 bankruptcy, and you no longer owe the creditor any money. With secured debt, you may have a choice of what happens, depending on the circumstances. If you are behind on your payments, the creditor may ask the court to lift the automatic stay in order to repossess or foreclose on the property. If you want to keep the property, you will need to cure the arrears and reaffirm the debt in bankruptcy. If you are not behind on your payments, you may be able to keep the property and keep making payments as before (again, you will need to reaffirm the debt in bankruptcy). If you have equity in the property, it may be sold to pay off the debt.

Legal Editor: James Shenwick, March 2015

Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.

Request A Lawyer

Back to Top

Our Lawyers

Our lawyers are screened and approved – they have all gone through an application and interview process. Each lawyer we recommend has been screened for significant experience, knowledge of ethics codes and rules, and law office practices, including customer service skills and handling of fees and billing.

Learn More About Our Lawyers

About Us

When you call us, you will be speaking with an attorney. One of our attorney referral counselors takes your call and talks with you about your legal question, or reviews your online referral request. There is no charge to speak with one of our attorney referral counselors -- we’re here to help.

Learn More About Us