What secured creditors can claim
A secured creditor holds a legal claim over specific assets of the company, such as property, equipment, or inventory. This security gives them priority over other creditors when assets are sold in an insolvency process. Common examples of secured creditors include banks and asset-based lenders, who often have fixed, or floating charges registered over company assets.
How unsecured creditors are affected
In contrast, an unsecured creditor does not have any claim over specific assets. As a result, they are generally paid after secured creditors and are at a higher risk of receiving only a small portion, or none, of what they are owed. Examples of unsecured creditors include landlords (in relation to rent arrears), suppliers without a retention of title clause, and service providers. While unsecured creditors rank above shareholders in the payment hierarchy, they often recover significantly less than secured creditors in the event of liquidation.
