When Does A Secured Debt Become An Unsecured Debt?

A secured debt may become an unsecured debt in situations where the property securing the loan has already been repossessed and sold by the creditor. If the sale of the property does not cover the contractual obligation, the consumer owes a deficiency balance. This deficiency balance then becomes an unsecured debt. Certain exceptions may apply and will depend on the exact nature of the security interest.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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