In most states, a debtor must rely solely on the state list of exempt property, while other states require that debtors merely use the federal list. An unsecured creditor is a creditor who has no collateral. When you finance a car, the dealer or bank takes the car as collateral. If you don't make timely payments on your car loan, they may repossess the car and sell it to pay off your loan. The store will be an unsecured creditor.
Secured creditors do quite well in bankruptcy and generally can reach and sell collateral.
Generally, if a secured creditor's debt is not paid off, the secured creditor can normally reach and sell the collateral even when legal title is in the name of the debtor. Inc. All rights reserved. Legal and copyright notice. Reproduction or copying is prohibited.