Title : Secured Creditors & Unsecured Creditors - What's the Difference?
link : Secured Creditors & Unsecured Creditors - What's the Difference?
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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