Types of Debt
Are There Different Kinds of Debt?
There are two types of debt which people can acquire: Secured and unsecured. Secured debt is that which is secured by collateral to reduce the risk to the lender. For example, a home purchased with a mortgage is secured because the home itself serves as collateral on the loan. If you default on the loan, the lender is entitled to seize your home and sell it to pay off the outstanding debt. Unsecured debt is that which is not backed by collateral. Credit card debt is a prime example; if you fail to make credit card payments, your creditors cannot take your property away.
When to Consider Bankruptcy
When considering bankruptcy, you should evaluate your secured and unsecured debts. It may be that filing for bankruptcy can help you retain possession of property that is in jeopardy of being seized or repossessed.