Being in debt is not something people want for themselves, but almost everyone has some form of debt they’re trying to catch up on. While in your eyes, all debts may be the same unhappy obligation, to the law, there are two different general types of debt: secured and unsecured.
Car bills, credit card payments, student loans, and mortgages are the most common debts held by Americans. These debts have various levels of security attached to them. Debts that are secure have some form of collateral that can be repossessed should you fail to make payments. Secure debts include debts such as car payments, mortgages, and any other debt that a creditor can put a lien on.
Unsecured debts are those that have no specific asset tied to them. These include credit card debt, and hospital bills.
The types of debt you have play a major role in how a bankruptcy proceeding will come along. Since unsecured debts do not have assets tied to them, you will not lose the item or benefit you gained from them in bankruptcy. Items tied to secured debts can be taken from you and sold off in bankruptcy, however. It’s best to always pay debts on time to avoid the stress and financial difficulties tied to having to file for bankruptcy.