A debt on which payment is guaranteed by an asset or lien. This means that a secured debt has collateral; if the debtor does not repay the debt in due course, the creditor has the legal right to take possession of the collateral and resell it to recover losses. In case of bankruptcy, the creditor is considered a secured creditor, which means the creditor receives proceeds from the sale of the collateral to satisfy the debt. If the collateral is insufficient, all secured creditors must have their debts satisfied before any unsecured creditors receive any funds.
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A debt for which specific assets have been pledged to guarantee repayment.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.