Whether in a news item, an article or a billboard advertisement, you have probably seen the terms secured and unsecured debt in relation to bankruptcy. As a core concept in bankruptcy, the division between secured and unsecured debt is not always as clear as debtors would hope. Depending on your situation, your amount of secured versus unsecured debt can help you choose between a Chapter 7 and Chapter 13 bankruptcy filing.

The main difference between secured and unsecured debt is the notion of collateral. If the debt is directly tied to physical property, then that debt is said to be secured. A creditor can, potentially, reclaim that property if you fail to pay your debt. The distinction, however, is not perfect. Past due taxes, for example, can be eliminated through bankruptcy only if certain conditions are met. In most instances, though, tax debt is considered secured even though there is no physical property.

Depending on your unique situation, an experienced bankruptcy attorney can provide clear direction regarding the benefits of seeking debt relief and what might happen to your debts. Unsecured debts can include:

  • Credit card debt
  • Department store charge cards
  • Utility bills
  • Medical bills
  • Personal loans

In some situations, as noted before, income tax debt might be discharged. Again, it is crucial to work with a knowledgeable attorney before making any life-altering financial decisions.