What is the difference between secured and unsecured creditors?

In California, secured creditors are those who have a legal claim upon a specific asset of the debtor (the person who owes a debt to the creditor). This claim is created by a contract or agreement between the two parties which gives the creditor rights to the asset if the debt is not paid as agreed. For example, a homeowner typically has a secured creditor in the form of his/her mortgage lender, who has a legal claim on the property should the homeowner fail to make regular payments. In contrast, unsecured creditors typically do not have a legal claim on an asset for the debt. Examples of unsecured debt include credit cards, medical bills, and most personal loans. Unsecured creditors have no right to repossess any property should the debtor default on the debt, so they depend on what is owed to them to be paid in full. Creditors’ rights in California are codified in state statutory law, which holds that secured creditors have priority over unsecured creditors when it comes to collecting their debt. This means that secured creditors have the first right to any assets if a debtor is unable to pay their debt. If the debt is still not paid in full, then unsecured creditors have the right to collect what is owed them.

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What is the difference between secured and unsecured creditors?

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