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Important Differences Between Secured, Unsecured Creditors during BankruptcyOne way to categorize creditors when filing for bankruptcy is as secured or unsecured. The distinction between them can be important for both your creditors and yourself:

  • Secured creditors have a lien on your property that they can use as collateral if you are unable to repay your loan. Common examples include home loans, car loans, and tax liens;
  • Unsecured creditors do not have a lien that they can claim on your property. Credit card debt, payday loans, and medical bills are often categorized as unsecured debts; and
  • Some unsecured debts are priority debts that must be paid in full, regardless of bankruptcy protections. Child support, spousal support, student loans and some tax debts are common examples.

Secured creditors generally receive priority in being compensated during bankruptcy proceedings. How creditors are compensated depends on whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Secured Creditors in Chapter 7

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National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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