Explaining Secured and Unsecured Debt

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A secured debt is a debt that is secured by some form of collateral: a car, house or other piece of personal property. An unsecured debt is a debt for which there is no collateral: no physical property for the lender to repossess in the event of non-payment. Common forms of unsecured debt include credit card debt and medical bills.

When filing for bankruptcy, your secured debts may be handled differently than your unsecured debts. If you have a secured debt and you wish to keep the property that is attached as collateral, you will typically have to keep paying that creditor. For example, if you want to keep your car and you have an outstanding loan on it, you will most likely have to keep paying the loan in order to keep the car.

During the course of your bankruptcy proceeding, you may be able to negotiate more favorable terms with your creditor in order to ensure you can consistently meet your payments on time and in full. An experienced bankruptcy attorney can assist you in calculating how much you can afford and determining how to best negotiate with your creditor in order to reduce your monthly payments.

Unsecured debts are typically discharged under Chapter 7 bankruptcy. Since there is no property attached as collateral to an unsecured debt, there is no property for the creditor to repossess. If you file for Chapter 13 bankruptcy, you will be required to submit a repayment plan for all your debts. However, unsecured debts are typically paid at rates much lower than the amount previously owed.

For more information regarding Chapter 7 and Chapter 13 bankruptcy and the effects of bankruptcy on secured vs. unsecured debt, please contact Cincinnati, OH bankruptcy attorney Kathleen Mezher now.

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