A secured creditor refers to a bank or asset lender that holds a charge over business assets. In regards to a consumer purchase, if a debtor is unable to provide the proper payments for their purchase, then the creditor can repossess collateral such homes and cars that are on loans. Alternatively, creditors can take debtors to court and sue them instead, resulting in the debtor needing to pay, get a garnishment on their wages, or have some other actions performed on them.

During a bankruptcy case, all of the debtor’s non-essential assets are sold in order to repay their debts. The trustee in charge of the bankruptcy will then repay each debt in order of their priority. Unfortunately, this means that unsecured loans like credit card debts will be prioritized last, giving those creditors the lowest chance of recouping their funds.