Unsecured debt is one in which the debt is not secured by collateral
Article 9 of the Uniform Commercial Code (UCC) states that any debt not secured by first-party or third-party collateral will not have a collection preference if the debtor files for Bankruptcy. For example, a mortgage is a secured debt because the lender retains an ownership interest in the physical property until the loan is paid in full.
If there is no bankruptcy, the unsecured creditor can still sue the debtor for the debt and obtain a money judgment against the debtor. Once in possession of the money judgment, the creditor can obtain a writ of wage and garnishment order, allowing the creditor to garnish the debtor’s wages. A money judgment can also allow the creditor to attach bank accounts and seize the debtor’s property to satisfy the debt.
