Secured debt is debt that has collateral attached to it. For example, a vehicle loan is a secured debt because if you do not pay the debt, they can repossess the car to pay off your balance. Real estate is another good example of a secured debt.
Unsecured debt is debt that does not have collateral attached to it. For example, medical bills are an unsecured debt because if you do not pay the debt, there is nothing that they can take from you to pay off your balance. For what it is worth, we have had many clients worried about a dentist taking out their fillings if they claim bankruptcy. That just does not happen. If you are concerned about the impact of a bankruptcy on your unsecured debt, come in for a free consultation and we can walk you through it.
This is Sam’s favorite question because he enjoys pointing out that Congress outlawed debtors’ prisons in 1838. In other words, no, you cannot go to jail if you do not pay your debts, but debt collectors can make your life difficult.
