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What Is Unsecured Credit Card Debt?

Credit card debt is unsecured debt because nothing you own is used as collateral against that debt. In other words, your creditors do not have the ability to take anything from you if you are unable to repay that debt.

By contrast, if you take out a car loan from the bank, the bank will make you sign papers that give them the ability to take your car from you if you cannot make the monthly car payments. That is a secured debt – it is secured by the car. The bank will sell your car and use the cash to pay themselves back.

Credit card companies cannot take anything from you because there is nothing securing the debt. It will severely damage your credit score and they can sue you if you do not repay it but they cannot take anything away from you without a court order (in which case they may get a judgement against you which might allow them to garnish your wages for repayment).

However, going to court is a long and expensive process for them which is why there are debt relief companies that serve as middlemen and help facilitate a deal between the person in debt and their creditors for unsecured debts.

Generally there are 2 types of debt relief companies for unsecured credit card debts, debt settlement companies and debt management companies.