An unsecured debt is a debt where there is no collateral. Unsecured debts include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. When there is no collateral securing the debt, then the creditor has to either pursue repayment directly from the borrower by relentlessly calling, writing letters, and pursuing other strategies to persuade the debtor to repay the debt. Often, an unsecured creditor will resort to suing the debtor in court in order to obtain a court-ordered judgement for repayment. There are a few creditors who will never compromise, but most will take a less than full payment as settlement in full in order to close a troublesome account rather than incur the cost of litigation or collection. (Utility companies, however, rarely settle for less than the full balance.)
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