Secured Creditors & Unsecured Creditors - What's the Difference?


A "secured creditor" is one that has a lien on property such as a home or car. A lien is an interest in property that a creditor can use to satisfy a debt. Liens can be voluntary (mortgage or auto loan) or involuntary (a lien on property resulting from unpaid taxes or a judgment). A secured creditor stands in a superior position to the debtor. If the debtor does not make timely payments, the creditor can foreclose on their interest and recover the property.

An "unsecured creditor" is a creditor who has no interest in any particular property of the debtor. Unsecured creditors are paid either voluntary by debtors or they must receive a judgment through the court in order to collect on a debt via garnishment or seizure. Obviously, the secured creditor has a much greater protection than an unsecured creditor in that the lien on the debtor's property is usually honored.

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In either case, a debtor with creditors may become financially insolvent. At that time, he can either work out a payment arrangement, file for bankruptcy protection under chapter 7 or chapter 13 of the U.S. Bankruptcy Code, or he can do nothing and hope the creditors don't pursue collection.

When faced with serious debt to the point of no return, consider speaking confidentially with an experienced bankruptcy attorney. Bankruptcy law has become a select area of the law and there is plenty to learn. Most attorneys will not charge for the initial consultation. You can also learn from website videos and tutorials from seasoned bankruptcy attorneys.


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