Unsecured Creditor

An unsecured creditor is a creditor who does not hold any security over the debtor's assets to guarantee repayment of the debt. In insolvency, unsecured creditors rank behind the costs of the proceedings, preferential creditors, and holders of floating charges. Most trade creditors, suppliers, and holders of money judgements are unsecured creditors.

In practice

Unsecured creditors typically receive the lowest return in insolvency (often pennies in the pound, or nothing at all). To participate in any distribution, they must submit a proof of debt. They are entitled to vote at creditors' meetings proportionate to the value of their claim. Before insolvency, unsecured creditors can improve their position by obtaining a charging order over the debtor's property, converting their claim to a secured debt.