Secured or Unsecured Creditor?
A secured creditor is one that has a lien against a particular piece of property. This property (or proceeds from its sale) must be used to satisfy the debt to the lien-creditor before it can be used to satisfy debts to other creditors. A lien may arise through statute, agreement between the parties, or judicial proceedings. For example, Secured Transactions and Mortgages. Secondly, a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a priority his debt must be paid when the debtor becomes insolvent before other debts. For example, Congress has granted priority to debts owed the Federal government, for example a Federal Tax Lien. The final type of creditor is one who has neither a lien against the debtor’s property or is the subject of a statutory priority. This type of creditor in referred to as an “unsecured creditor.
