If you are considering declaring bankruptcy, you might be confused by the many new terms and phrases you need to understand. One of those may be secured and unsecured debt and how they relate to bankruptcy. Knowing the differences between these can have a big effect on your choices moving forward. At Janssen Law, we try to make sure all Iowa citizens have all the information they need to successfully navigate the intricacies of a bankruptcy declaration.
Bankrate.com details what you need to know to understand the differences. Secured debt includes loans that are backed with your home, car or other collateral. If you had bad credit or needed a lower interest rate and higher borrowing limit, your lender may have placed a lien on your property in order to secure the loan.
Unsecured loans, on the other hand, are not collateralized. These loans are usually only given to borrowers with a high credit score, but there are more restrictions on the use of the loan. Since these debts are not tied to any of your property, you do not risk losing assets if you fail to repay the loan.
The type of bankruptcy you qualify for will depend on the amount of each debt that you have. In order to qualify for Chapter 13 bankruptcy, your secured debt must be less than that the maximum amount set by your state. You must also have less than the allowed amount of unsecured debt to be eligible. In order to learn more about the different types of bankruptcy and what you can qualify for, visit our web site.