We had discussed few times both secured and unsecured debts, and our readers are bit confused, so we like to clarify it one more time, and see if they can understand it in more explicitly. Let us what would be a medical bill? A medical bill is a type of unsecured debt which is dischargeable in bankruptcy.
A secured debt has collateral, for example your home mortgages, while a credit card has no collateral and hence an unsecured debt. Simply speaking, a secured debt has something tangible attached if not paid by the debtor, and in case of unsecured debt, nothing can be attached in case of non-payment. Examples of secured debts are home mortgages, home equity lines of credit, and car loans. Also, secured debts can be exercised through the means of liens which determines an amount owed and has to be paid and is now attached with the collateral.
What Are Security Interests? A seller is secured when they finance a purchase you make. Credit plans by retailers such as Sears and Good Guys give the seller a security interest in the products purchased, and they have the right to reclaim the goods if you discharge the debt through bankruptcy. Let us say you buy washer or dryer from Sears or Best Buy, you sign certain papers, and the creditors file a financing statement with the secretary of the state’s office. In contrast, if you purchase the products using a credit provided by a lender instead of the seller (a credit card) then the products are yours with no security interest in favor of the lender. However, creditors rarely take legal action to repossess the products.
What is a judgment Liens? A judgment lien is secured after your creditor obtains a court judgment which you have not answered (in the form of a default judgment or got it after you filed answer, and now like to execute against your fixed or secured assets. You cannot sell your assets unless you satisfy this judgment.
What is Tax Liens? If a tax lien is recorded, then a lien is perfected on all of the taxpayer’s property. IRS can file tax lien or the local municipal or state authority can also file. They needed to be satisfied and sometime your paycheck or property can be garnished and foreclosed.
What Blanket Security Interests? If you give the lender a security interest in all of your personal property, then the lien “blankets” all of your assets, potentially even including assets acquired after the security interest agreement is signed.
As we know, many people are unemployed and have lost their insurance. Quite often they are pursued by collection agencies for medical bills. This is the most common example of unsecured debt. Medical problems can occur suddenly and can hit hard. As you may know, there is no shame in filing bankruptcy, as so many filers these days are middle class and financially stable before medical reasons push them into bankruptcy.