When dealing with debt problems, many Kentucky residents may not know where to turn for help. Because you may have different types of debt, you may wonder how certain debt relief methods could impact the debt you have. Luckily, bankruptcy can often help address relief needs associated with both secured and unsecured debts.
If you choose to explore bankruptcy as a debt relief option, it may interest you to know that the type of debt you have could impact the type of bankruptcy you file. Therefore, information on what qualifies as unsecured debt and secured debt may help you better understand your financial situation.
Unsecured debt
When it comes to unsecured debt, these liabilities typically do not have any collateral behind them. This means that you did not provide any asset that the creditor could collect in the event that you fall behind on your payments. Common types of unsecured debt include credit card balances, medical expenses and utility bills.
Unsecured debts could cause you legal issues if your creditors choose to sue you in hopes of obtaining the owed payments. Typically, before taking this step, creditors may turn your case over to a collection agency in hopes of having the agency goad you into making your payments. Of course, collections actions can often prove stressful to deal with, and you may wish to find out how to prevent or stop such actions.
Secured debt
With secured debt, you should have some sort of collateral to back up the loan. If you fall behind on a secured loan, the lender will likely repossess the asset in order to make good on the debt. Examples of secured debts include mortgages and car loans. Each of these loans are backed up by the real estate attached to the mortgage or the vehicle attached to the title loan.
Unsecured debt and bankruptcy
If you have a considerable amount of credit card debt or other unsecured debts, you may find Chapter 7 bankruptcy useful when it comes to addressing your situation. Filing for bankruptcy creates an automatic stay on creditor actions, which means that collection efforts must stop until the end of the stay. Additionally, unsecured debts can go through a complete discharge during this proceeding, meaning that you will not have to repay your outstanding balances. If you feel like this option could help your circumstances, gaining more information may help.