Secured And Unsecured Debts: Eliminate Your Myths

In order to overcome  the crude obstinacy of overburdening debts one needs to have a proper understanding of what secured and unsecured debts are all about, which will also would help you to settle your debt related issues in a faster and more economical way. A secured debt is one where your property or assets are pledged against the loan amount. In this type of debt the lender or the authorities have a right to confiscate your property if you fail on your payments. Furthermore missing of payments may be dealt with in more stringent ways as the lender may even sell your assets and if the selling price of the assets do not comfortably make up for the loan amount the collection agency may call on you to settle the issue. The most commonly available example of secured debt is the home mortgage loan in which your house is pledged to the money lenders and an auto loan which keeps your car as a security and failure of payment can lead to its seizure. On the contrary in an unsecured debt, the money lenders will not be able to seize any of your assets as a security but if you fail to pay these debts the collection agencies may apply various coercive techniques to get their dues which are often termed as creditor harassments or other consequences such as wage garnishment. A common example of these debts would be credit card debts. At times medical bills are also part of this debt however there are hardly any loans taken for medical emergencies.

While filing for Bankruptcy secured and unsecured debts have to be mentioned separately. To mention in brief, if you are intending to file for Bankruptcy chapter7, it liquidates all your assets but with exemptions. If you desire to keep a few of your assets, you must make regular payments but here the advantage lies in total elimination of all your unsecured debts whereas in Bankruptcy chapter 13 which is primarily a reorganization of your debts, some of your secured debts may be kept in certain cases within the payment structure to allow you to stop the unnecessary stretching of your payment plan. However do not forget to consider debt settlement as an option before opting for bankruptcy and also try to educate yourself on various aspects of debt before deciding on ways to settle them in case you acquire too much.