Unsecured Debt

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How does bankruptcy treat different types of debts?
There are primarily two types of debt:
Secured debt is debt that is backed by some form of collateral. This collateral is there to reduce the risk that may be associated with the loan. A very common example of a secured debt is a mortgage. In case the borrower defaults on the payment, the bank can simply seize the property, sell it and use the money to recover the loan. Another example could be an auto loan.
Unsecured debt is one where the lender does not have any rights to any collateral. In case the borrower defaults on payments, the lender cannot take control of any assets against that debt. The can, however, take other actions, such as hire a debt collector, sue the borrower and take them to court etc. They can also report them to the credit bureau and this can have a negative impact on the credit rating of the borrower. The most common example of an unsecured debt is credit card debt. Other types of unsecured debt include medical bills, court-ordered child support, student loans, payday loans etc.
When we talk about bankruptcy, it is important to understand that each type of debt is treated differently depending on the type of bankruptcy. …show more content…
Chapter 7 bankruptcy is the most common type of bankruptcy. It is also known as straight bankruptcy or liquidation bankruptcy. If you have filed for Chapter 7 bankruptcy, all your unsecured debt can be discharged. This means that you will no longer have any obligation to pay that debt. But in Chapter 7 bankruptcy, secured debt is treated in a different manner. You may be able to get out of paying that debt but the creditor may still retain the right to repossess the

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