There is a significant difference between secured and unsecured debt and how it is treated during a bankruptcy action. Secured debt is backed by collateral. For example, a car loan is secured by the vehicle itself. When a person defaults on a car loan, the lender may repossess the vehicle and sell it in order to recoup on the loan. Home foreclosures occur because the mortgage loan is secured by the value of the home. However, credit card debts and other types of loans are not secured by any collateral and are designated as unsecured debt.
The nature of the … Read the more
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