A secured creditor is a lender or creditor who has a legal claim or security interest in specific assets of a borrower as collateral for a debt. This means that if the borrower defaults on the loan, the secured creditor has the right to take possession of the collateral to satisfy the outstanding debt, which provides them with a higher level of protection compared to unsecured creditors. The status of a secured creditor is critical in both reorganization and liquidation processes, as it affects how debts are prioritized and settled.
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