WHAT IS THE DIFFERENCE BETWEEN A “SECURED” CREDITOR AND AN “UNSECURED” CREDITOR?
A “secured” creditor has the right to collateral that can be repossessed. For instance when you buy a car and make monthly payments, your car is the collateral for the car loan and if you do not pay, the car can be repossessed without the lender having to sue you. An “unsecured” creditor has no right to take anything without a judgment or court order. When you owe money on your credit card, the credit card company is an unsecured creditor.
A secured creditor is a creditor whose claim against the debtor is secured by a valid mortgage, lien, or other security interest against property that is owned by the debtor. An unsecured creditor is a creditor whose claim against the debtor is not secured by a valid mortgage, lien or security interest against the debtor’s property. In other words, a secured creditor has collateral for its claim and an unsecured creditor does not. The basic difference is that a secured creditor may collect all or a portion of its claim from its collateral, while an unsecured creditor may not. It is common for the amount of a secured creditor’s claim to exceed the value of its collateral. This type of creditor is called a partially-secured (or undersecured) creditor. In Chapter 13 cases the claims of most partially-secured creditors are divided into secured and unsecured portions.
A secured creditor is a creditor whose claim against the debtor is secured by a valid mortgage, lien, or other security interest against property that is owned by the debtor. An unsecured creditor is a creditor whose claim against the debtor is not secured by a valid mortgage, lien or security interest against the debtor’s property. In other words, a secured creditor has collateral for its claim and an unsecured creditor does not. The basic difference is that a secured creditor may collect all or a portion of its claim from its collateral, while an unsecured creditor may not. It is common for the amount of a secured creditor’s claim to exceed the value of its collateral. This type of creditor is called a partially-secured (or under-secured) creditor. In chapter 13 cases the claims of most partially-secured creditors are divided into secured and unsecured portions.
A secured creditor is a creditor whose claim against the Debtor is secured by a valid mortgage, lien, or other security interest against property that is owned by the Debtor. An unsecured creditor is a creditor whose claim against the Debtor is not secured by a valid mortgage, lien or security interest against the Debtor’s property. In other words, a secured creditor has collateral for its claim and an unsecured creditor does not. Secured claims must be paid in full with interest. Unsecured creditors receive only what the Debtor can reasonably afford to repay during the life of the Chapter 13 plan.
