A secured creditor is a creditor (lender) to whom you’ve pledged an asset as collateral in order to obtain credit. Mortgages and car loans are the perfect examples—when you accept a loan from a lender in order to purchase a home or car, the home or car automatically become collateral against the loan.
If a borrower defaults on a secured credit loan, the secured creditors have a legal right to the asset used as collateral—meaning they can seize and sell the asset in order to meet your remaining debt obligations. Secured creditors do not lose their right to an asset if you go bankrupt or make a proposal.
Should you wish to keep the asset you pledged as collateral, you must continue to pay the secured creditor even if you have filed bankruptcy or a proposal. Creditors will allow you to continue paying, but only if your payments are up to date when you file your bankruptcy or proposal.
This is a quite complex area—if you have questions about secured creditors in relation to your own financial situation, you should meet with a Grant Thornton debt professional for a free, no-obligation consultation.