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Unsecured Debt

Unsecured debt is a loan that has no assets held to protect the lender in the event the borrower fails to pay a loan. All loans that were accepted without the benefit of collateral are considered unsecured debt. Credit card debt, hospital bills, and cell phone bills are all forms of unsecured debt. Providing loans that are not secured by collateral often put lenders at risk of not receiving money back from the borrowers. When borrowers fail to repay unsecured debt, the lenders only option is to take the borrower to court and seek repayment of the loan. With the risk of non- payment, lenders tend to charge a higher interest rates. A person who is in debt with unsecured debt can file bankruptcy and erase the debt. While the payments will end, a person's credit report is damaged which makes it hard to find financing for several years. Take a look at the unsecured debt questions below that have been answered by experts.

I only income is alimony of $72,000 annually which ends next year, but have $160,000 of debt and have a hard time making my payments. My home was foreclosed on after I took out a second mortgage and refinanced it to lower the interest rates. What are my options?

When you took the second mortgage on the home, the money from that should have went towards paying the first mortgage off. When you refinance a mortgage to lower the interest rates, you are still responsible for repaying the lender.

Your alimony payments are $72,000 which would disqualify for a Chapter 7 bankruptcy. However, you could look at filing a Chapter 13. In order to qualify for the Chapter 13, you would have to be able to finance the 5-year repayment plan which would require employment. You may be able to work towards a Chapter 13; however you will need to clarify that your alimony will end next year when you speak with a bankruptcy attorney.

I am 50 K in unsecured debt, unemployed and on disability and have to pay child support. I have no assets and am not qualified for a Chapter 7 because I have been ordered by divorce court to pay the marital debt. I can't do Chapter 13 because I can't work to repay. What will happen to me when there are judgments against me?

You could face the possibility of wage garnishment which will be figured by listing your bills against your usable income. The figure the attorney would come up with would more than likely be the amount that you would be expected to pay. If you can't use a Chapter 13 due to the inability to repay on it, garnishment would be the only option.

Because your debt is unsecured, creditors will not be able to take anything from you. However your credit will be severely damaged. If you are found to be eligible for the Chapter 13, your payments will be much lower because you have no secured debt. You can petition the court to have your child support payments modified based off of your spendable income. As far as what can happen to you when someone places a judgment against you; they can't take anything if you have nothing to take.

If a creditor files a judgment against me, can the creditor put a lien against my 401k plan if I can't afford the payments? If yes, how will this affect me later when I need the 401k for retirement?

Creditors are unable to access your 401k account. The 401k is exempt from claims filed by creditors. However, it may be possible for creditors to file a claim against you once you withdraw money from the 401 k account.

When a creditor files a judgment against you, you will have to testify in court in regards to your assets and liabilities. Usually, the creditor will garnish your checking accounts. If you have money in the accounts, it would go to the creditor. Without checking accounts or attachable assets, the creditor would be unable to collect from you.

An unsecured debt creditor is suing me for non-payment. The only asset I own is an old car and I am on Social Security Disability. Would the creditor be able to attach joint accounts with my name on them?

When seeking repayment of a debt, a creditor is able to attach anything that you own that isn't an exempt asset. This means your car would be attachable as long as there wasn't a lien on it from an auto lender. Accounts that you share with another person can still be attached, allowing the creditor to take half of the interest in the accounts. However, if you don't deposit money into the account and are only on the account in name only and don't contribute to the account and may be able to protect it. Social Security is exempt and cannot be touched by a creditor.

When a person finds themselves faced with unsecured debt and unable to recover, they are faced with the risk of being sued for non-payment by creditors. There are options for people who feel overwhelmed with debt and are unable to make their payments. If you are faced with unsecured debt and need help, you should ask an expert for assistance in finding a solution for your situation.
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