Bankruptcy Attorney Lawyer
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WHAT ARE SECURED AND UNSECURED CREDITORS? 

When it comes to filling out the bankruptcy paperwork, it is important to understand the difference between creditors that “hold security" and creditors that are “unsecured”.  The word security refers to whether something has been put up for collateral or security for a loan.  An example would be the financing of a car purchase or furniture purchase.  If you have purchased a car, or had a car and took a loan out on it, then the car is the collateral or security.  If we wipe out the loan in bankruptcy, then the only thing that the creditor can get back is their collateral or security.  For example, if you had a loan for a vehicle in the amount of $10,000.00, and the vehicle was only worth $6,000.00, we would wipe out the entire $10,000.00 debt and the creditor would get back the car worth only $6,000.00.  You would not owe them any more money, even though they may only get $5,000.00 or $6,000.00 for the car when they sell it.  The debt is wiped out.  The only thing they can get back is the collateral or what was put up for security.  There is no deficiency for you to pay if you file for bankruptcy. 

An unsecured debt is one where nothing has been put up for collateral.  Examples are signature loans, credit cards, most charge accounts (there are some store charges that are secured), medical bills, and judgments for rent, etc.  For these types of debts, they are usually completely wiped out, and you do not lose anything.