What is an unsecured creditor?

An unsecured creditor is a person or business that has lent money to another person or business, but did not take any security pledge against that loan. Under Creditors Rights Law in California, an unsecured creditor’s claim is subordinate to the claims of any secured creditors, meaning that they are paid last if the borrower is unable to repay the loan. An unsecured creditor also has fewer legal rights than a secured creditor in that they are not able to seize property or assets as collateral if the borrower fails to pay back the loan. Unsecured creditors rely on the debtor’s willingness to pay back the loan and the hope that there will be remaining money from the debtor’s estate to collect from if the loan is not repaid. Unsecured creditors can also seek court judgments for the unpaid debt. In California, an unsecured debt might include credit cards, medical bills, or personal loans. Unsecured creditors are responsible for collecting the debt from the borrower, which can become a complicated process with legal action taken in some cases.

Related FAQs

What are the appeals rights of creditors?
What is the Uniform Commercial Code (UCC)?
What is a discharge in bankruptcy?
What is the effect of filing a lien?
Can creditors threaten or harass a debtor in order to collect a debt?
What is a priority creditor?
What is the meaning of “priority debt”?
What is a proof of claim?
What is a homestead exemption?
What is a post-judgment discovery?

What is an unsecured creditor?

Related FAQs

Related Blog Posts