Knowledge Base

What is a Secured Claim?

Category: Bankruptcy 101

According to Bankruptcy Code 11 U.S.C. §506(a), a Secured Claim is defined as a Claim backed by a lien on particular property of the Debtor. A Claim is secured to the extent that a Creditor has the right to be paid from the property before other Creditors are paid. The amount of a Secured Claim usually cannot be more than the value of the particular property on which the Creditor has a lien. Any amount owed to a Creditor that is more than the value of the property normally may be an Unsecured Claim. But exceptions can exist; for example, see 11 U.S.C.§1322(b) and the final sentence of 1325(a). Examples of liens on property include a mortgage on real estate or a security interest in a car. A lien may be voluntarily granted by a Debtor or may be obtained through a court proceeding. In some states, a court judgment may be a lien.