I am researching the process of filing for bankruptcy in Arizona, and keep hearing about secured versus unsecured debt—what is the difference?

When you are at the threshold of filing for bankruptcy in Phoenix, your debts will be looked at in one of two ways: either secured or unsecured.


A secured debt is a debt that you owe that has attached, tangible property acting as collateral. The two most common kinds of secured debts are home loans and auto loans. If you fall behind on payments, your creditors are able to seize the collateral—your home or car—to settle your debt.


The majority of your debt is likely considered unsecured. These debts do not have any collateral, so it becomes messier for both the creditors and yourself when you fall behind on payments. Debts that overwhelm the majority of us—like credit card charges, medical bills, and student loans—usually fall under this category.


Because there is not specific property attached to unsecured debts, creditors face extra challenges when trying to settle your outstanding charges. Typically, your creditors will report your delinquency to a credit reporting agency or file a lawsuit against you. A creditor generally cannot begin seizing your property or garnishing your wages until a court settlement has been reached. One common exception includes federal student loans, which allow the Department of Education to garnish your wages without court action.


For your other unsecured debts, the court will decide to either garnish your wages or assign specific property to your unsecured debt to sell against your debt.


While this may sound intimidating and make you feel helpless, you are not alone. The Phoenix bankruptcy lawyers at Curry, Pearson & Wooten can help you put an end to creditor harassment. Call today to find out how at 602-258-1000 or toll free at 888-929-5292.