Whats the difference between a secured debt and an unsecured debt?
A secured debt is a loan backed by an asset like a mortgage on a house or a security interest on an auto. The creditor has the right to take back the security if the debtor fails to make a required payment. An unsecured debt is a loan not backed by an asset like utility bills and credit cards. An unsecured creditor does not have the right to take repossess property if you fail to make a payment. The creditor can bring an action to obtain a judgment against you. Security interests are generally not removed from property in bankruptcy and the creditor is entitled to payment or the asset. If the asset is worth less than the debt, the excess obligation can be discharged. If the asset is returned, a debtor’s obligation can be discharged.
