Unsecured debts

Unsecured debts are debts for which the debtor has not pledged collateral to guarantee payment. These commonly include charge accounts at retail stores or trade accounts with vendors. Because of the lack of collateral, such debts usually are charged a high rate of interest.

In bankruptcy law these debts are far down the list of debts to be repaid and in such cases are repaid at pennies on the dollar, if at all. On a secured debt, if the collateral value is below the amount owed, the remainder falls into the unsecured debt category