The two basic types of loans are “secured debt” and “unsecured debt.”

Secured debt is a loan underwritten by an asset used as collateral. These loans include mortgages, car loans, and some kinds of consumer loans for durable items such as TVs or furniture.

Unsecured debt includes credit cards and bank lines of credit,

After foreclosure or repossession, that portion of the loan balance unpaid by the proceeds known as a “deficiency” is another form of unsecured debt. It’s the portion of collateralized debt remaining after the underlying asset has been sold. Assets such as cars and other durable consumer goods decline rapidly in value after purchase. In the event they’re repossessed and sold, the proceeds of the sale are usually not enough to cover the balance on the loan, creating the deficiency, for which the borrower will be held responsible.

A deficiency can be discharged in a bankruptcy filing, if it’s created before the filing.

Real Estate can appreciate in value. Historically, it has, at an average rate of 5%/year over the last 100 years – but it can enter periods of decline, as it did precipitously from 2006 to 2011, leaving millions of homeowners “underwater,” owing more on their property than the property can be sold for in today’s market.

Although mortgages are considered secured debt, it is possible a foreclosure sale may bring less than the outstanding balance on a mortgage, creating a deficiency –for which the buyer can be held responsible under certain circumstances. Read more about deficiencies here.

Todd Murphy Law are experienced at restructuring, managing, and in some cases discharging debt.