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What Is a Secured Creditor?

  • By: Christopher Benson
  • Published: July 15, 2014

When you incur debt, there are generally two ways of doing it. Secured loans and unsecured loans.

A lot of times people think that secured loans are to purchase a item. Most of the time that is true. However, you can also have a secured loan that grants a lien against something you already own and you can use the loan proceeds to spend however you like.

A secured creditor has a lien on some sort of property. An unsecured creditor does not have a specific lien on anything.

When you and your creditor agree that you are borrowing money for one specific, large purchase, the loan is usually secured as a lien against the item your are purchasing. It’s secured because there is property (real property or personal property such as a home, car, jewelry, boat) that can be taken back, seized, sold or auctioned if you do not make good on your loan. Therefore, the debt is secure because if you default, the creditor can reclaim the item of value and cut their losses.

In unsecured debt, there is no agreement as to what the money is being spent on, so the debt is unsecure. For example, if you take out a credit card to pay for a vacation, remodel your kitchen, or buy 50 pounds of chocolate and then don’t make your credit card payments, there is nothing for the creditor to take back. The memories have been made, the new kitchen is worthless without the home, and the chocolate has been eaten.

In Chapter 7, 11, or 13 bankruptcy, secured get to go to the front of the line because they have a valuable item on the other end of the transaction, and a decision has to be made. Is the debtor going to surrender the property? Will he agree to pay back the loan? Will she agree to continue making payments? Or, will they suggest another course of action, such as a home loan modification? The debtor is allowed to make their intentions known on a form called a Statement of Intention, which helps inform the secured creditor what to expect during the bankruptcy process.

Over the past 22 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.

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