can a secured debt become unsecured?

Hi Lpxc

Welcome to the forums.

An unsecured debt is a type of debt that enables you to obtain goods and services in credit without pledging any property from your side. You sign a contract with your creditor on a promise to repay him within a due period of time. All types of credit cards, medical bills, old utility bills, personal loans are included in the unsecured debts. If you become delinquent to pay this debt, the creditor can only take legal action against you.

A secured debt is a type of debt where a property is pledged from your side. The creditor has the ability to repossess your house if you fail in making payments to mitigate the damages. He can sell your property to someone else after repossession but you still remain liable for any deficiency balance if it does not meet the contractual agreement. The laws regarding home mortgage vary from state to state and the creditors' rights usually depend upon the terms of the mortgage. It also depends if any other lender has any interest in the real property. To keep your interests protected, legal advice is very vital factor.

Answering your query, a secured debt can become unsecured only when the property pledged has been repossessed and sold to someone else by the creditor. If the sale of the property does not cover the contractual obligation, the consumer needs to pay the remaining balance. This remaining balance then becomes the unsecured debt. There are certain exceptions to it and will depend upon the security interest.

Please let us know if there is further any query from your side. We do hope to see your active participation in the forums.

Regards
Roxette