What is the difference between secured and unsecured creditors?

The difference between secured and unsecured creditors in Indiana is based on the type of claim each creditor has. Secured creditors have a claim to a borrower’s property which is known as “collateral”. This collateral helps the creditor get repaid if a borrower defaults on the loan. Examples of secured creditors include mortgage lenders providing money to purchase a home and auto lenders providing a loan to purchase a vehicle. Unsecured creditors do not have a claim to any collateral and the only way for them to be repaid is if the borrower can make payments on the loan. Examples of unsecured creditors include credit card companies, medical providers, and department stores. When a borrower files for bankruptcy in Indiana, secured creditors are given priority when it comes to getting repaid. This means that if there is not enough money to pay all creditors, secured creditors will receive payment first. Unsecured creditors will only receive payment after secured creditors have been paid. If there is still not enough money to pay all of the unsecured creditors, the remaining debt may be discharged or forgiven, leaving the borrower in a better financial situation.

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What is the difference between secured and unsecured creditors?

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