What is the difference between recourse debt and non-recourse debt?
As defined in recourse law, the term recourse debt relates to debt that is unsecured or is not backed by collateral that can be repossessed and sold as full or partial collection. It differs from non-recourse debt which is secured by the pledge of collateral that can be repossessed and sold in order to cover the debt. Bankruptcy can change the status of the debt from non-recourse debt to recourse debt in some cases. In some states, secured debt may be fulfilled even if the collateral does not cover the balance of the loan, while in other states the debtor will still be responsible for the difference in the sale of collateral and the balance of the loan. Bankruptcy recourse is governed by federal laws; however, recourse laws vary from state to state. If you have a question about recourse or non-recourse debt, bankruptcy recourse, or whether or not to file a recourse claim, it is best to check with an attorney that specializes in bankruptcy law or recourse law in your state.
