Struggling with debt is a common concern for many Tennessee consumers. If you find yourself with more bills than you can manage, past due notices in your mailbox and phone calls from debt collectors, your situation is serious. Debt of any kind can be stressful, but it can reach a point where it becomes overwhelming.
There are different types of debt – unsecured debt and secured debt. The differences between them can have a significant impact on your credit, the interest you accumulate and even what type of bankruptcy protection you may pursue in the future. Knowing as much as you can about your debt can help you make decisions that will be smart for your financial future.
What is unsecured debt?
Unsecured debts are not associated with any type of collateral. Because there is no collateral, creditors cannot come back and repossess something that you purchased on credit. Medical debt and credit card debt are the two main types of unsecured debt. For example, if you fall behind on your medical bills for knee replacement surgery, the hospital cannot reverse the surgery, nor can it take other assets, like your car, as payment.
When a consumer is late on payments for unsecured debt, creditors may garnish your wages, send the debt to a collections agency or even put a lien on your assets. The debt will also affect your credit score.
What is secured debt?
Secured debt is debt associated with a specific asset, such as your house or your car. When you accumulate secured debt, it is likely that the creditor will move to take back that asset. You could face repossession of your vehicle and other things you bought on credit, or you could receive notice of foreclosure on your home. Many of the things that belong to you do not truly pass into your ownership until you’ve paid the balance.
Dealing with either type of debt
When you cannot manage your debt, you may consider the benefits of seeking consumer bankruptcy protection. Chapter 7 is a popular option for individuals who have a lot of unsecured debt, while Chapter 13 may be smart if you are facing foreclosure of your home or are not eligible for Chapter 7.
The right choice depends on your individual situation. By seeking a complete assessment of your case, you can learn more about the options available to you and what you can do to move forward with the course of action most beneficial for your financial future.