Some readers from Pennsylvania may have experience in dealing with collection agencies in matters of unsecured debt. While an unsecured creditor may not inherently possess collateral to use against someone, they may be able to earn the right to seize assets through litigation. As such, the consequences of unsecured debt can be equally as adverse as they would be in cases of secured debt.
Unsecured creditors may take legal action against someone by filing a debt collection lawsuit. If successful, they may then have a variety of collection options to pursue, such as levying bank accounts, garnishing wages or putting a lien on a home. With respect to real estate property, it may be possible for an unsecured creditor to claim a person's home in some circumstances, but they may not always be free to do so.
For instance, a collection agency working with an unsecured debt may attain a writ of execution to allow it to seize and sell authorized real estate assets associated with the debtor. The assets can then be used to constitute either partial or complete repayments of the original loan. However, it may not be possible for the property to be sold in some cases. If a previous lien has been attached to the property, that lien will take precedence, and the property cannot be sold until the prior lien has been settled.
In a situation such as this, someone who is having a hard time with credit management and unsecured debts may wish to secure legal representation to assist them. In addition to helping with negotiations with creditors, an attorney may be able to aid someone with their financial planning. In some cases, filing for bankruptcy may be one of the most viable means of finding debt relief.
Source: SF Gate, "Can Unsecured Creditors Collect Their Debt from the Sale of My Home?", Ciele Edwards, December 12, 2014