Secured Versus Unsecured Debts and Debt Settlement
For many Lilburn residents, and for those who reside in Georgia more broadly, debt settlement can be a solution to unmanageable debt. In particular, debt settlement is often a welcome solution to get a fresh start from debt accrued on credit cards or as a result of a medical emergency or ongoing chronic health condition. As you may already know, debt settlement is a process through which your Georgia debt settlement attorney negotiates a payoff amount with your creditor or creditors. The negotiated amount will be for a total of less than what you owe, and often for an amount that is substantially below the total owed. Once you pay the agreed-upon amount, the creditor agrees to forgive remaining debt. Accordingly, at the end of the debt settlement process, you will no longer owe the debt.
You may be wondering about the types of debt that can be eligible for debt settlement and those that cannot. Our Georgia debt settlement lawyers can explain the differences among many forms of debt in relation to debt settlement. Below, we will discuss the differences between secured and unsecured debt for purposes of debt settlement.
Secured Versus Unsecured Debt: What to Know
In order to understand how the nature of a debt — as secured or unsecured debt — affects debt settlement, it is necessary to understand the differences between these types of debt.
The primary difference between secured and unsecured debt, according to the Consumer Financial Protection Bureau (CFPB), is that collateral is associated with secured debt. In other words, there is a tangible asset associated with secured debt. As such, if a person defaults on making payments on a secured debt, the creditor can repossess the asset. A common example of secured debt is a vehicle loan. You are making monthly payments on a vehicle loan, the creditor can repossess your car. In this scenario, the car is the collateral associated with the secured loan.
Unsecured debt, differently, does not have collateral securing it. Common forms of unsecured debt include credit card debt and medical debt. If you have these forms of debt and do not repay the creditor, there is no specific asset that the creditor can repossess.
Unsecured Debt Often Can Be Settled While Secured Debt Cannot
Debt settlement is typically only possible with unsecured debt. Creditors do not have an interest in agreeing to settle a secured debt for less than what is owed since they can simply repossess the collateral associated with the loan.
With unsecured debt, however, the creditor often makes a calculation that settling the debt is the best chance of being repaid in some form. Accordingly, a creditor may be willing to negotiate a lower settlement amount that the total owed in order to settle an unsecured debt.
Contact a Lilburn Debt Settlement Lawyer
If you have any questions about debt settlement, one of the experienced Lilburn debt settlement lawyers at Konn Law Firm LLC can help. An attorney at our firm can provide you with more information about negotiating a debt settlement agreement and any other factors surrounding debt settlement. We can also assess your current financial situation and provide you with information about possible debt settlement options and scenarios. Contact our firm today for more information.
Source:
files.consumerfinance.gov/f/documents/cfpb_building_block_activities_differentiating-secured-unsecured-loans_guide.pdf
