I am thinking of a simple case.
For example, suppose I bought a home, but there is a mortgage where the contract stipulates that if I default, the bank can seize up to 95% of the home value. This 95% is a hypothetical situation, so please bear with me.
I also have a credit card debt.
If I default on both obligations and have access to 5% of the home value, does the credit card company collect debt through this unencumbered portion (i.e. 5%)?
If this is the case, isn't it reasonable to say that unsecured debts have implicit collateral? In the hypothetical example, even though my credit card debt is considered "unsecured" debt, because the credit card company can come after my unencumbered portion (i.e. 5%, the part of my asset that is not collateralized to secured-debt creditors), in effect, the unsecured-debt creditors do have collateral as well?
I ask this, because I think of unsecured debt as something without a collateral. But, in reality, the unsecured-debt creditors can come after any unencumbered asset that does not have senior creditor's priority claim (e.g. usually secured-debt creditors). So, one could think of unsecured debts also have implicit collateral?