Many people don’t realize the difference between secured and unsecured creditors. Bankruptcy attorney Benjamin Ginter, who runs the Law Offices of Benjamin J. Ginter in Cranford, New Jersey, explains how it all works.
A secured creditor is someone that has an interest or lien on a piece of property you own. That means that if you don’t continue paying for that piece of property, that creditor has rights to take that property back.
An example is a mortgage. If you don’t pay your mortgage, your house will be foreclosed. Another example will be your car finance repayment, If you don’t pay for your car, they will take your car away. A lien holder on a car or a commercial loan secured by a business’s inventory and receivables are also examples.
Unsecured Creditors
Unsecured creditors do not have that ability to take property away if you don’t pay them back. For example, if you have debts out on an American Express or a Capital One credit card, they cannot take any property from you.
The credit that you use is unsecured, not attached to any property that you own. That is the difference. If you file for bankruptcy and you owe American Express $10,000, it is wiped out.
