Legal Definitions - unsecured creditor

An unsecured creditor is a person or entity to whom a debt is owed, but who has not taken any rights against specific property of the debtor as collateral. This means that if the debtor defaults on the debt, the unsecured creditor cannot automatically seize any of the debtor's assets to recover the debt.

Examples of unsecured creditors include credit card companies, medical providers, and suppliers who have not obtained a security interest in the goods they have sold to the debtor.

For instance, if a person owes $5,000 to a credit card company and cannot pay it back, the credit card company cannot automatically take the person's car or house to recover the debt. Instead, the credit card company may have to file a lawsuit and obtain a judgment against the person before it can try to collect the debt through other means.