While the national and global economy continues to be relatively strong, financial burdens are still everyday realities for many residents in Tennessee. If you find yourself cringing every time another bill or statement arrives, you are far from alone. One thing you might be starting to consider is pursuing debt relief via a bankruptcy. Before you make this choice, however, it is important to assess not only the amount of your debt but the type of debt you owe. Understanding this will help you choose the right path forward.
As explained by The Motley Fool, there are two primary forms of debt: secured debt and unsecured debt. A secured debt is something that is attached to or related to a particular asset. The asset essentially acts as collateral for the debt. If you cannot repay the debt, the lender may be able to seize the collateral in exchange for payment. Car loans and mortgages are common examples of secured debt.
An unsecured debt, in contrast, has no associated asset or collateral. Instead, a bank extends credit to you based on your creditworthiness in their eyes. Interest rates on unsecured debts are generally high as there is more risk to the lender since they have no assets to seize in lieu of repayment. Credit card bills are the most common form of unsecured debt for most consumers.
This information is not intended to provide legal advice but is instead meant to help residents in Tennessee better understand the types of debt they may have and how that may influence their decision about whether or not to file for bankruptcy or what type of bankruptcy plan might be best for their situation.