Unsecured debt is a debt that you’ve taken on without needing to offer any form of collateral in return. Your credit cards, personal loans and student loans are examples of unsecured debts. If you defaulted on your student loans, the lender couldn’t take away your degree. Instead, lenders first send you to collections and can ultimately sue you in order to recoup losses. Defaulting on Federal loans can mean wage garnishment or a loss in your tax refund or Social Security because you owe the government. Some unsecured debts are also eligible to be discharged in bankruptcy. However, student loans are the exception to the rule. While technically possible, it is incredibly difficult to discharge student loans in bankruptcy.
See also: Secured Debt