Secured Debt

Debt can become secured by a contractual agreement, statutory lien, or judgment lien. Contractual agreements can be secured by either: a Purchase Money Security Interest (PMSI) loan where the creditor takes a security interest in the items purchased (i.e. vehicle, furniture, electronics); or a Non-Purchase Money Security Interest (NPMSI) loan where the creditor takes a security interest in items that the debtor already owns (i.e. household goods). Secured Debt is any debt backed by specific assets or revenues of the borrower. In the event of default, secured lenders can force the sale of such assets to meet their claims or repossess the assets. The creditor's claim may be divided into a secured claim, to the extent of the value of the collateral, and an unsecured claim equal to the remainder of the total debt.

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