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Bankruptcy Law Frequently Asked Questions (FAQs) | Missouri & Illinois Common Bankruptcy Legal Questions

Q:

What is the difference between secured and unsecured debt?

A: In short, the difference is your collateral. Your secured debt is tied to something that you own. Your mortgage is tied to your home. If you don’t pay your mortgage, the bank can foreclose. Your car loan is tied to your car. Your car can be repossessed if you stop making payments. These loans provide some collateral for a lender to guarantee your payments and not paying these debts carries heavier consequences.

Unsecured debt is just the opposite. It would include everything that does not have collateral on the loan like credit card bills, medical bills, lines of credit, etc. While these debts are not tied to any of your assets, there are still consequences for not paying them. A lender can sue you for the balance and garnish your wages, taking money directly out of your paycheck.
Wondering which ones are more important to pay?

Visit our blog for a series that includes an in-depth discussion on secured and unsecured debts.

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