Secured vs. Unsecured Debt
When prioritizing debt repayment, it is important to understand the differences between secured and unsecured debt, as everything owed by an individual will be placed in one of these categories.
The Balance explains that secured debts are just that—they are “secured” by an asset such as a house or car. This means that if a borrower becomes delinquent on the payment of a secured debt, the lender can place a lien on the asset and move toward repossessing it. On the contrary, a bank cannot claim any assets when individuals fall behind on paying unsecured debts. Even so, they can hire a third party or debt collector to try to get individuals to pay. They may also sue an individual or request the court to garnish their wages. In effect, a person’s delinquencies may also be reported to the credit bureau.
When people are strapped financially, they might opt to only pay some bills, while others turn to bankruptcy. In either case, it’s important to understand how different debts are handled in the context of bankruptcy. Credit card debts are the most common form of debt that lead to bankruptcy in Georgia. As unsecured debts, credit card balances are permanently wiped out in Chapter 7 bankruptcy, and are reduced in Chapter 13 bankruptcy. Medical bills and student loans also top the list of debts leading to bankruptcy. Both are classified as unsecured debts, and bankruptcy offers a way to manage them effectively.
As mentioned, home and auto loans are secured debts. When individuals fall behind on their mortgage payments, bankruptcy provides several options to help them avoid foreclosure. Similarly, when a person is delinquent on their auto loan, bankruptcy can help stop the repossession process and help individuals catch up on their payments.
From credit cards to mortgage loans, Attorneys Ira D. Gingold and Jamie L. Gingold have the experience to help clients find solutions to problems with all types of debt, secured and unsecured. Most of all, they are committed to helping individuals make a fresh financial start.