WHAT IS THE DIFFERENCE BETWEEN SECURED AND UNSECURED DEBT?<\/h3>\n

SECURED DEBT<\/strong>\u00a0is specifically tied to certain property, typically by a lien, giving the lender the right of repossession. (In the case of a possessory lien, the lender holds the security-property as long as you owe the debt: The pawnbroker holds the ring you pawned; the landlord or utility company holds your cash security deposit.) The classic examples are a home mortgage and a car loan; if you don\u2019t make your mortgage payments, they\u2019ll take your house; if you don\u2019t make the car loan payments, they\u2019ll take the car. The property secures the debt; the property is the lender\u2019s “security interest.” \u00a0When we borrow money to buy a thing (home, car, TV, etc.) and the debt is secured by that thing; that\u2019s called a “purchase money security interest” or PMSI. \u00a0Most liens are consensual \u2013 we agreed to it, in exchange for the cash or the thing that we got \u2013 but statutory and judgment liens are also quite common.<\/p>\n

UNSECURED DEBT<\/strong> is everything else \u2013 most credit card debts, medical debts, some tax debts (those without a lien), student loans, back rent & utilities (except for what\u2019s covered by security deposits), the money you borrowed from your best friend or cousin \u2013 most of those debts are unsecured. If an unsecured creditor is not happy with how you are paying (or not paying) the debt, they have no property they can repossess. An unsecured creditor must first go to court, sue you, get a judgment, then try to execute on the judgment, typically by sending the sheriff out to try to glom onto your non-exempt property.<\/p>\n

Bankruptcy addresses primarily unsecured debt \u2013 even in bankruptcy, if you don\u2019t make the mortgage payments, they\u2019ll take your house, and if you don\u2019t make the car payment, they\u2019ll take your car.<\/p>\n

[important]UNSECURED DEBT (mostly) gets wiped out in bankruptcy. \u00a0SECURED DEBT must be paid (mostly) or the collateral must be surrendered. \u00a0[\/important]<\/p>\n","protected":false},"excerpt":{"rendered":"

WHAT IS THE DIFFERENCE BETWEEN SECURED AND UNSECURED DEBT? SECURED DEBT\u00a0is specifically tied to certain property, typically by a lien, giving the lender the right of repossession. (In the case of a possessory lien, the lender holds the security-property as long as you owe the debt: The pawnbroker holds the ring you pawned; the landlord […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":181,"menu_order":1,"comment_status":"open","ping_status":"open","template":"","meta":{"footnotes":""},"yoast_head":"\n