Credit and Bankruptcy Law


What is the difference between a secured and unsecured creditor?

A secured creditor is one who has a security interest in the debtor’s property, while an unsecured creditor has no security interest. For example, a person might borrow $20,000 from a local bank but would need to put down something as security or collateral in exchange for the $20,000. Once the debtor pays back the $20,000 principal loan balance and the accompanying interest, then the debtor receives back the title to his property and there is no longer an active lien on his property. Many creditors, however, are unsecured. Credit card companies are unsecured creditors. This becomes important in bankruptcy law, as secured creditors get paid before unsecured creditors.


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