Secured creditors

A creditor (someone who is owed money) whose loan is secured over property of the debtor, i.e. the debtor has provided collateral to the creditor. A secured creditor has a ‘security interest’ over some or all of the company’s assets to ensure their debt is repaid should the company default on the loan. The collateral for a loan may be a mortgage over real property, or a security interest over personal property. Conversely, an unsecured creditor does not have a security interest in the company’s assets.

In the event of insolvency leading to voluntary administration or liquidation, secured creditors are paid back in full before unsecured creditors.