Secured debt vs. Unsecured debt
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Secured debt vs unsecured debt can sometime make a world of difference in the rights of a creditor to repossess an item. The most common examples of secured debts include a mortgage or car lien. Examples of unsecured debts are credit cards and medical bills.
The secured creditor has more options than the unsecured creditor. A bank holding the title of your car as collateral usually has the right to repossess the car from your driveway when you are delinquent on payments. A mortgage holder may start a foreclosure to sell your house when you miss payments. In both cases you usually end up losing the collateral such as the car or house. |
This is very different from credit card debt, where a creditor usually must file a lawsuit for money owed, rather than repossess collateral. Although bankruptcy can discharge both secured and unsecured debts the lien is generally not dischargeable. Translation: if you want to keep your house or car- you have to keep paying the note.
Although we stated earlier that credit card debt is unsecured debt, there is a rare instance when it may be considered secured debt. When a store such as “Best Buy” or “Rooms to Go” issues a credit card or extends credit for you to buy merchandise in store they may take what is called a “Purchase Money Security Interest” in your Bedroom Set, Computer or TV. Although repossession of used items may not be worth the effort, the creditors do retain the option. Badcock Furniture is known to excercise this right!
Although we stated earlier that credit card debt is unsecured debt, there is a rare instance when it may be considered secured debt. When a store such as “Best Buy” or “Rooms to Go” issues a credit card or extends credit for you to buy merchandise in store they may take what is called a “Purchase Money Security Interest” in your Bedroom Set, Computer or TV. Although repossession of used items may not be worth the effort, the creditors do retain the option. Badcock Furniture is known to excercise this right!