When is rent considered to be an unsecured debt?

While rent isn’t typically considered debt, when you fall behind on paying it, you actually become indebted to your landlord. If this happens, your landlord is likely to take action in order to evict you. However, since you are not at risk of losing any belongings, your debt is considered unsecured.

What happens if you default on a secured credit card?

There are secured credit cards, which are backed by an initial deposit. The deposit is equal to the spending limit on the card. Late payments are still reported to credit bureaus, and the bank will keep the deposit if you default.

How does unsecured debt work in a court of law?

Unsecured debt isn’t backed by any property, but a lender can try to reclaim their money in the court system. They can pursue a court judgement through a debt collection lawsuit. The borrower is summoned to court, where failure to show up grants the decision in favor of the lender.

What happens to unsecured debt on a credit card?

Because the lender can sell the property if the borrower fails to pay the mortgage, the mortgage is a secured debt. By contrast, most credit card debt is unsecured debt. A credit card lender can’t take back the school clothes or pet supplies charged with the card if the borrower fails to make the monthly payment.

What makes a credit card an unsecured debt?

A credit card is an unsecured debt. That typically means that there is no collateral, and there is typically nothing you own that a credit card company can go after unless you are sued and the creditor or collector gets a judgment against you. Before that happens, you should be notified of the lawsuit and have the opportunity to respond.

What happens when a credit card goes into default?

A consumer who allows this type of debt to go into default should expect a campaign of calls from a debt collector. Lawsuits are filed to collect these debts: However, the creditor may have the right to file a lawsuit against the consumer to force payment of the debt through a judgment.

Can a credit card company seize my property?

Before a credit card company can seize your property, they’ll have to sue you and obtained a judgment. Even then, it will only be your non-exempt assets that are subject to seizure. At National Bankruptcy Forum, we have attorney members in every state ready to hear your case.

Can a credit card debt be wiped out in bankruptcy?

Although several versions of bankruptcy exist, the most common type filed is Chapter 7. Under Chapter 7 bankruptcy, usually all unsecured debts from credit cards and the like are wiped out. However, Chapter 7 bankruptcy doesn’t cancel mortgage debt.