Secured Debt

A secured debt is a debt that is “attached” to an asset. For example, if you borrow money to buy a house, the mortgage is a secured debt; your house is the security for the loan. If you finance a new car, the car is security for the debt, so the car loan is a secured debt.

If you have a secured debt, and you don’t make the payments as agreed on the loan, the creditor can seize the asset to satisfy the loan.

Unsecured Debt

An unsecured debt does not have an asset attached to it. For example, if you go to a store and use your bank credit card to purchase something, the amount you owe to the credit card company is an unsecured debt, because there is no security pledged as collateral for the loan.

Priority Debt

A priority debt is a debt entitled to priority in payment, ahead of most other debts, in a bankruptcy case. A listing of priority debts is given, in general terms, in 11 U.S.C. § 507 of the Bankruptcy Code

Common examples of priority debts for individuals are alimony, maintenance or support of a spouse, former spouse, or child, and wage claims of employees if you are self employed.

If you have questions deciding which of your debts are entitled to priority status, you should consult an attorney.

Administrative Debt

A special category of Priortiy Debts are Administrative Debts, which are created when someone provides goods or services to your bankruptcy estate. The best example of an administrative debt is the fee charged by an attorney or other authorized professional in representing the bankruptcy estate.