Debt

Unsecured Debt Debt with no collateral behind it, like credit cards and medical bills

Jordan Park By Jordan Park, Senior Debt Relief Editor · Updated 2026-06-09
← All Glossary Terms Definition
Unsecured debt is debt that isn't backed by collateral, meaning no specific asset secures the loan if you stop paying. Common examples include credit cards, medical bills, and most personal loans. Because lenders take on more risk without an asset to seize, unsecured debt typically carries higher interest rates than secured loans like mortgages or auto loans. This category is the primary target of debt settlement programs, since creditors may negotiate balances they can't easily recover. Unsecured debt is also the type most likely to be discharged in bankruptcy, though outcomes depend on your situation, the chapter you file, and applicable exceptions. If you fall behind, creditors generally must sue and win a judgment before they can pursue collection beyond your account, since there's no collateral to repossess directly.
Also Known As
Non-collateralized debt Signature debt Unsecured liabilities Unsecured loans
Used in Context
  1. Because your credit card balance is unsecured debt, the settlement company focused negotiations there rather than on your car loan.
  2. When matching you with a debt relief provider, Dreamy Leads asks how much of your balance is unsecured, since that's what most programs address.
  3. Filing for bankruptcy may discharge unsecured debt like medical bills, but your mortgage and other secured obligations work differently.
Related Terms
Debt Secured Debt Debt backed by collateral the lender can seize if you stop paying Debt Debt Settlement Negotiating with creditors to pay less than the full balance — significant savings, real risks Debt Chapter 7 Bankruptcy A liquidation bankruptcy that can wipe out most unsecured debts in a few months Debt FDCPA (Fair Debt Collection Practices Act) Federal law that limits how third-party debt collectors can contact and treat you Debt 1099-C (Cancellation of Debt) The tax form lenders send when they forgive debt you may owe taxes on
Frequently Asked Questions

Is credit card debt unsecured?

Yes. Credit card debt is one of the most common forms of unsecured debt because no collateral backs it. That's why card issuers charge higher interest rates and why these balances are frequently targeted in debt settlement and most likely to be discharged in bankruptcy.

Why does unsecured debt have higher interest rates?

Lenders charge higher rates on unsecured debt because there's no collateral to seize if you default. The added risk gets priced into your interest. Secured loans, like mortgages or auto loans, generally carry lower rates because the lender can repossess the underlying asset.

Can unsecured debt be wiped out in bankruptcy?

Unsecured debt is the type most likely to be discharged in bankruptcy, but it isn't guaranteed. Outcomes depend on your income, the chapter you file, and any exceptions that apply. Some unsecured debts, like certain taxes or student loans, may be harder to discharge.

Ready to compare debt relief options?

Free quotes from licensed experts — no spam, no obligation, results in 60 seconds.

Get Free Quotes →

Sources

Get Free Quotes → All Terms