Having a lot of debt can be overwhelming, and if you are considering a North Carolina bankruptcy, the process may seem intimidating. At Wootton & Wootton, P.C., we know that you want things to go as smoothly as possible. Therefore, understanding the different types of debt can be helpful in coming to terms with your finances and moving forward with the bankruptcy process.
An unsecured loan is not backed by any collateral. Obtaining an unsecured loan is usually based on whether your credit qualifies you or not. These types of loans typically have higher interest rates than secured loans and can generally be used for any purpose. For instance, your credit card is an example of an unsecured debt. If you stop paying your bill, the company can file a legal action against you but cannot seize any of your property.
On the other hand, a secured loan is one that is intended for a specific purpose and is supported by some type of collateral. For example, if you took out a mortgage when you bought your home then the house is the collateral. If you stop making payments on the mortgage, the bank can foreclose on your home. Because these types of loans are backed by collateral, they often have lower interest rates than other types of financing according to Bankrate.
Whether or not your debts can be discharged through bankruptcy will depend on a few variables. Most secured debts are not easily discharged. However, the bankruptcy process can help you be able to make your payments. Unsecured debts may be dischargeable if you qualify for Chapter 7. For more information on types of debt, please visit our website.