What Is Unsecured Debt?
Unsecured debts are those that do not have any property attached to it as collateral, such as a car or a home. In other words, if someone loaned you money in this way, they can’t repossess anything.
Some common examples of unsecured debts are:
- Credit card charges
- Payday loans
- Some taxes, such as income taxes
- Medical bills
- Utility bills, such as telephone or electric bills
- Personal loans
When you miss payments for unsecured debts, creditors will typically attempt to contact you for payment and report the debt to a credit report agency. Eventually, they may file a lawsuit against you in an attempt to recover the debt either through garnishment or attaching it to property. Without a court judgment, creditors cannot legally seize your assets.
What Happens to Unsecured Debt in Bankruptcy?
Many unsecured debts can be discharged in a Chapter 7 bankruptcy, especially credit card debt, medical bills, and payday loans. If you are filing a Chapter 13, you will create an affordable monthly repayment plan to repay a portion of the debts. Most Chapter 13 filers will typically only pay a percentage of unsecured debts and end up having the remaining discharged at the end of their plan.
Are There Unsecured Debts That Cannot Be Discharged?
However, some unsecured debt is nondischargeable in Chapter 7— meaning it is not wiped out.
Nondischargeable debts include those for:
- Child support
- Spousal support
- Student loans (except in very limited circumstances)
- Certain taxes
- Recent debts for luxuries
- Debts incurred on the basis of fraud (such as lying on a credit application or writing a bad check)
- Unlisted creditors
What If Creditors Are Harassing Me About Debts?
Since creditors know that unsecured debt can be difficult and costly to recoup, many of them resort to threats and intimidation to convince you to pay. While creditors do have a right to call you, if they resort to harassment they may be breaking the law. This rarely stops them however, and the calls and letters become disruptive, upsetting, and overwhelming.
Protection from Experienced Attorneys
One of the advantages of having a lawyer on your side when you are overwhelmed by unsecured debt is that all calls and correspondence with your creditors can be routed through our office. Let the attorneys at Weintraub & Selth, APC handle your creditors while you take steps to get back on track. If you are ready to file for bankruptcy in Los Angeles, we're here to help.