Two Types of Debt in Bankruptcy

: Chris Lee Law Firm

  Filed under: Debt

two types of debt

When filing personal bankruptcy, most consumer debt can be classified into two categories. One is secured debt like your home or your car, and the other is unsecured debt like medical bills and credit cards.

Secured Debt

Secured debt has property used as collateral for the loan. If you don’t pay your mortgage, you may lose your home, and if you don’t pay your car note, they will be by to repossess your car. This is the type of loan that you will want to pay first if you wish to continue to use the collateral. If you get behind in these payments, lenders are usually unwilling to let you settle for less than what you owe to catch up. They will take back the property and sell it, and sometimes they will even sue you for the balance after the sale.

Unsecured Debt

According to a recent CNBC article,  55% of American households have credit card debt. Other unsecured debt includes payday loans, medical debt, unpaid utility bills, student loans, taxes, and personal loans. Most unsecured debt is obtained by your credit score and a promise to pay. If you fall behind in these payments, you will receive many phone calls, letters, and threats of lawsuits. If a creditor does take you to court and wins a judgment against you, they may be granted the right to attach a lien to your property to enforce payment on the debt.


Filing bankruptcy can eliminate your qualifying debt. Most of your unsecured debt will be wiped away. If there is a judgment against exempt property, you can also have those removed like they never happened. Some unsecured debt like alimony, child support, current taxes, and most student loans will not be eliminated, and you will need to continue to pay those obligations.

If you are behind in your secured payments and worried you are about to lose your collateral, Chapter 13 bankruptcy allows you to spread out those payments over a court-approved payment plan while retaining your assets.

If you have debt you would like to have eliminated, contact a Fort Worth bankruptcy attorney today.

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