A secured party creditor has the ability to collect debts owed to them in the event of liens or bankruptcy. They are legally recognized in the United States. In the event that a person owes a debt and cannot pay it back, it is the secured party creditor that will be at the top of the list to receive their money or some collateral equal to the amount due. Those that are unsecured will be filtered to the bottom of the list. Unsecured parties only receive money that may be left over after all of the secured parties have been satisfied. When a person goes into bankruptcy, they are usually not paying their creditors because there is not enough money to go around. Therefore, the unsecured debtor at the bottom of the list is the least likely creditor to receive any payment from the debtor.
Qualifications
To become a secured party creditor, there must be an official security agreement and it must be filed with the local Secretary of State office with a host of other forms and paperwork. The national Uniform Commercial Code (UCC) is a recommendation of laws that must be followed in addition to local and state laws regarding debt and doing business. These forms filed with the local Secretary of State fall under the UCC. They are called UCC-1 forms and must be properly filled out to the letter to be accepted and enforced.
Debtors
One thing that a person possibly facing bankruptcy should know is how to legally eliminate debt. While that may be done with the assistance of an attorney or an accountant, it can also be done without. It takes a lot of know-how and rules must be followed precisely. Debt elimination is possible without filing bankruptcy. They will need to know who the primary creditors are that are owed and which status they have. Before a person signs a financing agreement, they should read the fine print. This will describe which type of creditor the person is and whether there is collateral involved in the transaction.