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What are secured and unsecured debts?

June 28, 2022

By Diane Drain Attorney & Retired Law Professor

Secured debts are included separately from unsecured debts in bankruptcy proceedings.

Personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, as well as other credit cards used to purchase consumable things, are examples of unsecured debts. Unsecured debts include car leases, medical expenses, and personal loans. Secured debts are those for which the creditor has a security interest in your property as collateral. Mortgages, vehicle loans, finance company loans (typically secured by household belongings), furniture, computers, and gadgets are examples of secured debts. If you paid for products with the store credit card, such as one from Home Depot, Best Buy, or another retailer, the business is likely to have a security interest in the items you bought, making it a secured creditor.

Secured Property

You must either reaffirm or redeem secured obligations or surrender secured property to the creditor after filing a Chapter 7 bankruptcy. You have the right to keep any secured property as long as you make timely payments on the loan for that property. If you choose to surrender secured property, however, the secured creditor will not be able to sue you or try to recover any money from you. Borrowers have been compelled to sign cross-collateralized agreements by several credit unions. This means that the borrower consented to their bank or savings union seizing their bank accounts in order to pay for the vehicle’s or credit card late payments.

If you’re not sure whether you signed these types of documents, go over the paperwork you signed when you bought your car or created your account. Before defaulting on a car loan, you should consider moving your money to a new bank.

Do not bank with Wells Fargo; they have been known to freeze accounts despite the fact that you owe them no money.

By |Published On: June 28th, 2022|Last Updated: July 28th, 2022|

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Diane L. Drain - Bankruptcy LawyerDiane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

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