A secured creditor is a
creditor with the benefit of a
security interest
In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the ''collateral'') which enables the creditor to have recourse to the property if the debtor defaults in makin ...
over some or all of the assets of the
debtor.
In the event of the
bankruptcy of the debtor, the secured creditor can enforce security against the assets of the debtor and avoid competing for a distribution on liquidation with the
unsecured creditor
An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor.
In the event of the bankruptcy of the debtor, the unsecured creditors usually obtain a '' ...
s.
In most legal systems,
secured creditors also have the option of releasing their security and proving in the
liquidation, although, in practice, they would rarely do so. Any creditor with a lien on all or a portion of an asset, such as a mortgage on real estate or a bank loan, is said to be a secured creditor.
See also
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Preferential creditor
A preferential creditor (in some jurisdictions called a preferred creditor) is a creditor receiving a preferential right to payment upon the debtor's bankruptcy under applicable insolvency laws.
In most legal systems, some creditors are given p ...
References
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Credit
Bankruptcy
Insolvency