Having financial difficulties is something that you might experience at some point in your life. As the debts mount, you will have to decide how to handle those debts. In some cases, debt management is possible. It is important to understand some basic types of debt and how each must be handled.

What is unsecured debt?

Unsecured debt covers bills like medical bills, credit card bills and personal loans. This type of debt isn’t secured by property. Some creditors might penalize a borrower for late payments by increasing interest rates or adding late fees to the total. In some cases, creditors might sue for the payment of the bill.

What is secured debt?

Secured debt covers things like a car note or mortgage. Secured debts are secured by some type of property. If the borrower fails to pay the debt, the property can be repossessed.

What are back taxes and back child support?

These types of debt are serious. Back taxes often mean high interest rates on the debts. Back child support can have serious consequences if it isn’t paid or if a plan isn’t established to pay off the amount owed and keep up with future payments.

How should I create a payment plan to reduce debt?

You have to come up with a budget that includes your income and the amount of your bills. Generally, bills like the mortgage payment and legal debts like child support should take priority over some other debts. In some cases, you might be able to contact creditors to get the total amount you owe reduced, but that isn’t a guarantee.

It is vital that you understand all your legal options for debt management. By learning all your options, you can decide which option you are most comfortable with.

Source: FindLaw, “Repaying Debts,” accessed June 04, 2015