The Legal Responsibility of Repaying a Debt

Borrowing money carries moral and legal responsibilities.
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Most likely, you will agree that if you borrow money from someone you have a moral responsibility to pay it back. However, your legal responsibility may not be the same as your moral one. Depending on the type of debt you owe, and the titling of the debt, your payback responsibilities may vary. Outside of paying a debt back or surrendering property, bankruptcy may be your only way to eliminate your legal obligation.

Unsecured Debt

Unsecured debt is debt you simply agree to pay back, without putting up any collateral. Credit card debt is a common example of unsecured debt, as your promise to pay is not "secured" by any property. If you fail to pay back your credit card debt, a lender cannot take any of your property to satisfy the debt. However, it can file a lawsuit against you and get a judgment that garnishes your wages or places a lien against your property, as you still have a legal responsibility to pay back unsecured debt.

You may escape from this legal obligation if the statute of limitations on your debt runs out. The time period varies by state, but in New York, for example, the statute of limitations is six years after your first default. Typically, a creditor will sue you and get a judgment long before the statute of limitations expires, thereby extending the length of time it has to collect on the debt.

Secured Debt

A secured debt has property backing up your promise to repay the money you owe. Legally, you have the same responsibility to pay back a secured debt as an unsecured debt. However, with a secured debt, your creditor can seize the named collateral if you fail to repay your debt. Common types of secured debt include car loans and home mortgages.

Spousal Debts

If you get married in a community-property state, you may end up having legal responsibility for your spouse's debts, even if you don't incur them yourself. In Washington, Idaho, California, Nevada, Arizona, New Mexico Texas, Louisiana and Wisconsin, spouses are both liable for the debts incurred in a marriage. For example, if your husband opens a credit card in his own name after you get married, you are still liable for the debts on that card. Debts that existed before the marriage remain the sole obligation of the responsible party.


A successful bankruptcy will eliminate your legal obligation to pay back most, if not all, of your debts. With a Chapter 7 bankruptcy, you risk the liquidation of your valuable assets but emerge debt-free in just a few months. A Chapter 13 bankruptcy takes up to five years to complete and requires you to make monthly payments toward your debt, but it grants you the same protection from creditors as Chapter 7. You also get to keep all of your assets in Chapter 13. However, in both cases you must still pay off your secured debts or surrender the underlying collateral. Both types of bankruptcy also appear on your credit report for years to come, seven in the case of Chapter 13 and 10 with Chapter 7.

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