Most of us have some form of debt, whether it be credit card debt, student loans, or a home mortgage. The first step to dealing with debt is to understand what kind you have.
The most common form of debt is consumer debt, which is any debt that is personal in nature and between a person and a merchant.
Secured versus unsecured debt
There are two kinds of consumer debt: secured and unsecured. Secured debt is when you borrow money to buy an object, like a house or a car, and the lender can take that item back if you don’t make your payments.
Unsecured debt, on the other hand, is not attached to an item. If you don’t make your payments, the lender can’t take something back. Instead, you’ll face debt collectors and lawsuits.
Common types of unsecured debt include credit card debt, medical bills, student loans, and personal loans.
Debt not protected by the Fair Debt Collection Practices Act
Both secured and unsecured debt are protected under the Fair Debt Collection Practices Act, which prevents debt collectors from using abusive or fraudulent tactics to collect debt.
Certain special kinds of debt, however, are not protected by the FDCPA. These include business-related debt and non-transactional debt, such as unpaid taxes, traffic tickets, and fines.
This means that debt collectors may try to collect those special kinds of debt in ways that would otherwise be illegal.
What should I do about my debt?
Whether your debt is secured, unsecured, or a special kind of debt not protected under the FDCPA, you should do everything you can to make your payments.
If that’s not possible, try to negotiate with your lenders. They may be willing to accept a smaller amount of money. Declaring bankruptcy is also an option.
Some lenders will try to talk people with unsecured debt into getting a home equity loan to help make payments. However, if you’re unable to pay off the home equity loan, you could lose your home, so be cautious about agreeing to this. Paradoxically, bankruptcy does not have the stigma most people fear. Because of the rules associated with bankruptcy (i.e. you can only claim bankruptcy every 7-10 years), bankruptcy filers are more likely to get certain types of credit since the creditors know they won’t be able to file again for an extended period of time.
To learn more about your options, call us today at 361-578-7200 or contact us. Let us help you make the best choice for you and your family. You may also text 361-648-6888 seven days a week!