What is the difference between secured creditors and unsecured creditors?

A "secured creditor" is a creditor that has a lien on an item of your property. A lien is an interest in property that allows a creditor to have your property sold to satisfy your debt to that creditor. Mortgage lenders and car lenders are secured creditors. They have voluntary liens on your property.

An "unsecured creditor" is a creditor who has no interest in any of your particular property. Most credit card issuers are unsecured creditors. Outside of bankruptcy, there are only two ways an unsecured creditor can get paid. First, you can pay the debt voluntarily. This is the way most debts are paid. The other way unsecured creditors get paid is much harder. They must sue you, get a judgment against you, and ask the sheriff to seize your particular property and sell it to satisfy the creditor's claim. When the sheriff seizes your property for an unsecured creditor, that unsecured creditor has an involuntary lien and becomes a secured creditor for bankruptcy purposes.

Even in bankruptcy, the secured creditor has greater protection because its lien on your property is usually honored. The bankruptcy does not remove it.