What is a secured claim?
A secured claim is a financial claim that is protected by collateral. Collateral is an asset such as property, a business interest, or a savings account, pledged by a debtor to guarantee payment of a loan. In California, creditors with secured claims have the right to take back the collateral if the debtor is unable to make the payments on the loan. This is called repossession. A secured creditor can generally file a lawsuit in court to repossess the collateral and can also get paid first in the event of a bankruptcy. Secured claims usually have a higher priority than unsecured claims, meaning that they must be paid first before unsecured creditors receive any payment. This means in a bankruptcy, a secured claim is paid out to the creditor before unsecured claims.
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