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What is the Difference Between an Unsecured Creditor and a Secured Creditor?

Big Idea: A secured creditor has loaned money against collateral, which are assets of the debtor. An unsecured creditor is a one who has loaned money, but has no collateral.

The difference between an unsecured creditor and a secured creditor comes up in virtually every bankruptcy.  Broadly, the distinction has to do with collateral, which is the asset or property a borrower offers to secure a loan from a lender.  An unsecured creditor is one that lends money without collateral.  A classic unsecured creditor is a credit card company that extends a debtor credit (read: loans money) with nothing more than a promise to repay.

A secured creditor, as you might have guessed, is one that has loaned money backed with collateral.  Notable examples here are your home loan and car loan. Each of those debts will ordinarily be secured by the asset the money has been loaned against (such as your house or car).

Not only that, but a secured creditor may be fully or only partially secured. A fully secured creditor is one whose debt is equal to or less than the amount of the collateral securing it.  For instance, if your house is worth $100,000.00 and you owe $90,0000, the creditor is considered “fully” secured. A partially secured creditor is one who is owed more than the value of the asset. Like in our previous example, your home is worth $100,000 and the creditor is owed $110,000.  In that instance, the creditor is secured to the $100,000.00 and unsecured as to the remaining $10,000.


Bankruptcy Columbus Georgia, Benjamin Wallace, Wadkins & Wallace



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