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Explaining Unsecured Debt in a Chapter 7 Bankruptcy

November 25, 2009

The simplest way to explain unsecured debt is to describe it as debt that is not “secured” by any property or collateral. That means that debt cannot cause a lien against your property and that your property cannot be taken away from you in order to pay the debt. Examples of unsecured debt include debts from credit cards, personal loans, medical bills, and even cell phone bills.

In other words, the credit card company cannot take your purchases back as payment for your overdue bill or place a lien on your home. Unsecured creditors usually try to get paid through many aggressive tactics, including the use of collection agencies, constant letters and phone calls, but they really have little legal recourse in getting this debt paid back. But they have the power to report delinquent payment that will affect your credit rating.

An option to stop the harassment and to get a fresh start is to file for a Chapter 7 bankruptcy. When you file for a Chapter 7 bankruptcy most, if not all, of your unsecured debt will be canceled when your case is discharged. Once your Chapter 7 case is discharged, all remaining unsecured debts will be erased.

It is important to note that by filing a Chapter 7 bankruptcy, some of your property might be sold to pay off some unsecured debts. Additionally, if you are behind in your mortgage or car payments, your home or car may be repossessed by the mortgage company that financed the loan, but they can’t be sold to cover your unsecured debt. For more information on how to save your home through bankruptcy it is best to consult with an experienced bankruptcy attorney in your local area.

For a free consultation on getting rid of unsecured debt, contact bankruptcy law firm, Fears | Nachawati, by calling us at toll free 1.866.705.7584 or send an e-mail to


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