Attorney Grant McNuttAn unsecured debt is an obligation or debt that does not have personal or real property serving as collateral for payment of the debt. If you fail to make payment on an unsecured debt, the creditor cannot take any of your property without first suing you and getting a court judgment. There are a few exceptions to this rule, such as back child support, back taxes or delinquent government backed student loans. But, generally, a nongovernmental, unsecured creditor cannot seize any of your assets without a court judgment.

On the other hand, a secured debt, has a property serving as collateral for the debt.  Examples of real or personal property would be a home, land, vehicle, furniture, ATV, boat or jewelry. If you fail to make a payment on a loan that is secured by any of these items, the creditor can take that specific property.

What Unsecured Debts Include

Some of the most common types of unsecured debts include:

  1. Personal signature loans that you were not required to pledge real or personal property by security agreement;
  2. Most department store and gas charge cards such as Kohl’s, Children’s Place, Shell, etc.;
  3. Credit cards such as Capital One, Discover, etc.;
  4. Payday loans;
  5. Student loans;
  6. Utility bills, such as electric, water, garbage, etc.;
  7. Medical bills;
  8. Court judgments that have been yet been certified with the Probate Court;
  9. Back rent or lease payments;
  10. Income taxes that the government has yet to file liens with the Probate Court;

As you can see, most debts are unsecured. As stated above, if you fail to make a payment on the loan or account, the creditor can contact you to try to obtain payment, report the delinquent debt to a credit reporting agency, or file a lawsuit against you. To obtain a judgment, the creditor simply must file a complaint in state or federal court and serve you with a copy of the lawsuit. You have the right to file an answer to the complaint and contest the lawsuit before a judgment can be entered, but generally,  there is no defense. Once a creditor obtains a court judgment against you, they can proceed with collection. Collection can include garnishment of your bank account or wages or execution on your home, vehicles or other personal property for a sale at an auction by the sheriff.

Feeling Overwhelmed by Unsecured Debt?

Bankruptcy will stop a lawsuit in its tracks. If you aren’t happy with your finances or if you realize that your bills are getting to be more than you can handle, please call us if you have any questions regarding Chapter 7 or Chapter 13 bankruptcy, stopping a foreclosure, avoiding liens, stopping law suits, discharging debt, etc.  The attorneys at Bond & Botes, P.C. can help you!

We will analyze your situation and help you make the best decision possible to help you navigate your financial problems. Contact us today to schedule a free consultation.

Grant McNutt
Written by Grant McNutt

Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999.Read his full bio here.

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