When it comes to repaying your debts and borrowing money, you need to know about two different concepts that play a major role: secured and unsecured debts. Knowing the difference between the two can be extremely helpful when you are going through the bankruptcy process so that you can get a better hold on your business bankruptcy and know where you stand.
Everything You Need to Know About Secured Debts
Secured debts are much different from unsecured debts because they involve collateral. Secured debts are those that are secured by a particular asset, such as your home or your vehicle. The asset stands in place as collateral, which means if you fall behind in payments, this could help repay the lenders. The lenders are able to take back particular assets through a “lien,” which gives them a right to seize the property as it becomes theirs. You might wonder if you will be able to get your car or your home back after it is taken, but the answer is “no.” It will often be sold at an auction.
You have probably most commonly heard about secured debts when you are talking about mortgages and auto loans. Both allow you to pay back the money but, if you fail to do so, the asset will be taken from you. Until the loan is paid off, you technically do not own the asset, as lenders are allowing you to “borrow” it until you are paid up. Once the loan is paid off, you have much more freedom with your assets.
How Unsecured Debts Differ from Secured Debts
Unsecured debts are different in the way that a lender does not have any collateral on the item, which means that it is yours from the beginning. This means that, if it is an asset that you are making payments on and you are not keeping up with the payments, the lender will typically not be able to take it from you. However, they can take other actions against you to try and claim the money that you owe them.
These are cases where you are most likely to see a debt collector come knocking at your door or making phone calls to you consistently until they receive the money you owe them. You might even be sued at some point and the court will try to garnish your wages, which means that certain money you are paid through your paychecks will go automatically to the lender. Your credit report might also be impacted if you do not pay off your debts, which is why it is important to do so.
The Reality of Not Being Able to Pay Business Debts
What do you do if you are in a bad financial position and you are unable to pay any of your debts? If you have lost assets while you attempt to get back on track with your business or you believe that you will never catch up, it might be time to speak with a skilled Texas bankruptcy attorney about your options moving forward. Our attorneys at MJ Watson & Associates have helped many clients with their business bankruptcy cases so that they could have a fresh start. Please contact us at 817-877-2861.