Understanding Secured, Unsecured, and Priority Claims


Secured Debts

A creditor with a secured debt has quite a bit of leverage in a bankruptcy proceeding. A secured debt essentially means a creditor is obligated payment for a specific property or asset that can be taken away if the debt isn’t monetarily satisfied. For example, a bank that offered you the mortgage loan you are paying can initiate a foreclosure on your house if you fail to make payments. Similarly, a vehicle can be repossessed if you fall too behind on your payment obligations. In a secured claim, the creditor has a lien against property or assets you possess.

Unsecured Debts

Unsecured debts will be listed on Schedule E/F form of your bankruptcy filing. Only unsecured debts are divided into priority and non-priority creditor claims; secured debts do not need this extra distinction. 

Unsecured debts are debts that do not have collateral for the creditor to either possess while payments are being made or repossess if they are not. In the absence of collateral, interest rates will be higher for unsecured debts. Credit card and medical debt are two of the most common examples of unsecured debt. 

Priority Creditor Claims

Priority creditor claims (which will always be unsecured debts) are claims that are not eligible for discharge in a bankruptcy. By law, claims for alimony and child support in a divorce agreement are not dischargeable and should be given first attention when arranging repayment options in bankruptcy. Furthermore, certain tax liabilities must be designated as priority creditor claims.

Non-Priority Creditor Claims

This type of unsecured debt is eligible for discharge in bankruptcy. The two types of debt we mentioned earlier, medical and credit card debt, are non-priority unsecured claims. A notable exception is student loan debt, which is classified as unsecured debt but is almost never eligible for discharge.

Contact Us

If you are even considering bankruptcy, you are likely being overwhelmed with creditors attempting to collect payment and just striving for some relief. While the majority of your personal debts are likely to be classified as unsecured, this does not mean all unsecured debts are created equal. Please call us soon at (405) 447-2521 to get a competent and caring legal team behind you so you can effectively navigate your bankruptcy and come out the other side feeling good. We offer a no-obligation consultation. 

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