Repayment terms are generally established prior to services or goods rendered. Payment is generally made with money but can also be made by the exchange of goods. Debtors who fail to make the required payments to creditors may face aggressive collection efforts by third party collection agencies which can be hired by creditors.
Consumers who are unable to meet their debt obligations may explore debt settlement options, Credit Counseling, debt consolidation or bankruptcy which allows, in some cases, for the discharge of certain debts. Creditors can offer secured loans which are secured by assets or "Collateral" which can be sold if the debtor or borrower fails to make payments, allowing the creditor to regain the money lent to the borrower.
Unsecured debts are also available from creditors, but unlike Secured Debt, unsecured debt does not have collateral or a specific asset which can be liquidated to repay the loan to the creditor.
Consumers who file Chapter 7 Bankruptcy may be able to discharge certain unsecured debts. Consumers who file Chapter 13 Bankruptcy must repay creditors, but creditors are paid by priority outlined by U.S. Bankruptcy laws. Payments are made in the following order: 1) administrative claims; 2) priority claims (unpaid wages and tax claims); 3) secured creditor claims; 4) Unsecured creditors; 5) equity claims.