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What is the difference between secured creditors and unsecured creditors?

Creditors secured unsecured
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What is the difference between secured creditors and unsecured creditors?

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10

A “secured creditor” is a creditor that has a lien on property. A lien is an interest in property that a creditor can use to satisfy a debt. Some liens are voluntary, for example a mortgage or a security interest in a car. Other liens are involuntary, for example a lien on property resulting from unpaid taxes or a judgment. An “unsecured creditor” is a creditor who has no interest in any particular property of the debtor. Outside of bankruptcy, there are only two ways an unsecured creditor can get paid. First, the debtor can pay voluntarily. This is the way most debts are paid. The other way unsecured creditors get paid is much harder. They must sue the debtor, get a judgment against the debtor, and ask the sheriff to seize some property of the debtor and sell it to satisfy the creditor’s claim. Even in bankruptcy, the secured creditor has greater protection because its lien on the debtor’s property is usually honored. The bankruptcy does not remove it.

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