What Is An Unsecured Transaction?
An unsecured transaction is a transaction where the lender or creditor does not hold a lien on the debtor’s property, and instead, they focus on debt collection when the buyer defaults on payments. The creditor does not get protection in an unsecured transaction; before taking legal action, the creditor can only rely on voluntary repayment from the debtor.
Unsecured transactions include credit card issuers, utility companies, cash advance companies, and landlords. Generally, the creditor will attempt to collect the debt through direct contact and report it to the credit bureaus, Equifax, Experian, and TransUnion. The creditor may also choose to sell the debt to a collection agency.
If the creditor has failed to collect the debt through several attempts, they must sue, win a judgment against the debtor, and begin bankruptcy proceedings. The creditor should also file a complaint in court before they pursue wage garnishment and liquidation as means to recover the debt.
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