Secured and Unsecured Debt

Juggling debt, especially if you begin to fall behind on payments, can be stressful. Sometimes just understanding all the financial terminology can be overwhelming, so I’m here to make sure you’re informed about different kinds of debt and how they are handled by creditors.

Unsecured Debt

Debts such as credit cards, utilities, medical bills, back taxes, back rent, personal loans (if not backed up by property), and student loans are considered unsecured. These types of debts are not tied to any actual property, so if you don’t make your payments, creditors will try to collect money from you, rather than property you were making payments on.

If you miss one payment, you can expect a notice in your next bill letting you know your balance is past due. After more than one missed payment, your creditor will send additional notices and will also try to contact you by phone. If this continues long enough, your debt could be referred to a collection agency. The agency may call you very often, at inconvenient times, or even at your place of employment. Some companies are quick to skip the collection agency and will move forward with filing a lawsuit against you. You can fight this in court, but if you aren’t making payments, the creditor will likely be allowed to begin garnishing your wages. The timeframe of this entire process varies and depends not only on which company you’re dealing with, but also how much debt you owe and the likelihood that the debt will be recovered.

Secured Debt

Secured debts are tied to real property as collateral, such as a car or home. If you don’t keep up with your payments, the lender may take and sell the property to pay what you owe. You may receive a phone call after a missed payment, and it’s best to work with your creditor if at all possible. They may be willing to lower your interest or payments in order to avoid the work of collecting what you owe. If you are simply unable to make payments on an auto loan, your lender may need to repossess your car, and they usually do not need a court order to do this. If you’ve fallen too far behind on your mortgage, your lender may ask for the court’s approval to foreclose on your home, which could take several months. Some creditors will take additional legal action against you such as suing you for the total amount you owe or taking and selling your collateral, and then suing you for any remaining balance owed.

Ask For Help

When you’re unable to keep up with your debt payments, it’s important to act quickly to avoid dealing with collections and lawsuits. You may be able to cut some costs and make some changes to get caught up on bills, or you may need to consider bankruptcy. I’m here to help you sort through your finances and make the best possible decisions for your financial future.