Kimbery Credit Counselings Blog
Monday, November 26, 2007
How does Unsecured Debt work
Lets first say you have been approved for a credit card with a spending limit of $7000. You then activate the credit card and start using it to purchase various items like, clothes, furniture, movies etc) Once you purchase any item with that credit card, the card created unsecured debt. The card is considered unsecured because it was issued to you based on your credit and payment history and there is no property securing your purchases. If for any reasons you cannot make payments to the credit card company they can cancel your credit privileges and must resort to sending you to collections were the collection agency tries to collect from you or suing you in court and convincing the judge to grant them a judgment against you for the amount you owe them. Once a judgment has been granted, the credit card company may be able to garnish your wages, up to 25%, depending on the state law.
Unsecured debt can only be obtained by having an average to good credit rating and payment history. Unlike secured debt, unsecured debt usually comes with flexible payment amounts and terms and credit limits. If you cannot pay your unsecured debts they often may be released in bankruptcy. Over spending on credit cards is the leading cause of uncollected unsecured debt.
If you have a lot of unsecured debt and dont know what to do a debt consolidation program may be for you.
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