What is the difference between secured and unsecured creditors?

The difference between secured and unsecured creditors is an important concept in bankruptcy law in Maryland. A secured creditor is a lender, such as a bank, who gives out a loan with a specific piece of property attached as collateral. If the debtor fails to meet the terms of the loan, the lender can take possession of the property. An unsecured creditor is a lender who makes a loan without any collateral. In the event of a bankruptcy, secured creditors are given priority over unsecured creditors, meaning they get paid back first. Unsecured creditors have to wait until after the secured creditors are paid off before they can be compensated for their loans. In a bankruptcy, unsecured creditors only receive a portion of what they are owed, while secured creditors regularly receive the full amount. In Maryland, secured creditors are paid first before unsecured creditors because the collateral that is attached to the loan gives them a greater financial security.

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What is the difference between secured and unsecured creditors?

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