What’s The Difference Between A Secured Debt And An Unsecured Debt?

people working on secured debt

When a person files for Chapter 7 bankruptcy, they can expect most of their debts to be discharged. Chapter 7 is a liquidation type of bankruptcy that allows those who cannot pay off their debts to quickly get a fresh start. If you’re planning on filing for this type of bankruptcy, you’ll need to know the difference between a secured debt and an unsecured debt. No need to panic because our law firm is here to help! To learn more, read this blog or contact an Orange County Chapter 7 Bankruptcy Lawyer today.


The main difference between the two is that secured debts are secured by property while unsecured debts are not. A secured debt has collateral requirements, the lender could repossess your assets if you don’t pay back your debt. When you get a secured loan for an asset, that asset is at risk if you fail to pay back your debts. Alternatively, unsecured debt has no collateral backing, so the only way for the lender to collect an unpaid debt is by filing a lawsuit.

Examples of secured debts include:

  • Mortgages
  • Car (or other vehicles) loans
  • Home equity loans

Examples of unsecured debts include:

  • Credit cards
  • Personal loans
  • Gym memberships
  • Medical bills
  • Student loans

Again, assets are used as assurance that you’ll pay off your secured debts to lenders. With unsecured debts, the only promise that you’ll pay back your debts is your word.


Once you file for bankruptcy, most of your unsecured nonpriority debts should be discharged. “Nonpriority” debts are those that are simply not as important as priority debts. Some debts, like alimony and child support, can’t be discharged during the bankruptcy process. These are considered priority debts because it’s essential that you eventually pay them off. While student loan debts are nonpriority unsecured debts, these unfortunately cannot be discharged.

There are two main methods to paying off your debts: the snowball method and the debt avalanche. With the snowball method, you pay off the smallest debts first as quickly as possible. Meanwhile, you pay off debts with the highest interest rates first so that your larger debts don’t continue to grow. You may need to use your assets to pay off secured debts.

Are you considering filing for Chapter 7 bankruptcy? Are you seeking a highly experienced bankruptcy attorney who can guide you through the process? Look no further because the Law Offices of Michael D. Pinsky, PC is here to help! Contact our effective team today for an initial consultation.

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