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Understanding a creditor's options for collecting unsecured debt

Ohio residents may be interested in how a creditor could legally collect on a debt when there is no property securing that debt. While it may take a trip to the courthouse, a judgment against the debtor could cause serious trouble if not addressed.

There are two main types of debts. A secured debt is one that allows a creditor to sell or reclaim a piece of property if the debt is not paid, such as a home mortgage or auto loan. An unsecured debt, however, is one that is not backed by collateral property. When the debtor fails to make the required payments, the creditor has no property to reclaim as payment on the debt.

The creditor is not without options if a debtor does not pay. The creditor can sue the debtor over the unpaid debt. If successful, this results in a civil judgment against the debtor. The creditor may then be able to get a lien against the debtor's property, garnish their income and have money taken from the debtor's bank accounts.

While these judgments allow a creditor to attach a judgment lien against a piece of property, they may not be able to force the sale of that property if there are other creditors with an interest in the property. For instance, if a mortgage has first claim to a home, the creditor with a later judgment lien cannot seize the property in order to pay off the debt.

Understanding the options available when a person is drowning in debt can be difficult without the assistance of an attorney. The attorney may be able to assess the person's financial and debt situations and recommend an appropriate course of action. This could include negotiations with creditors or filing for bankruptcy when necessary.

Source: SF Gate, "Can Unsecured Creditors Collect Their Debt from the Sale of My Home?", Ciele Edwards, December 12, 2014

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