A secured creditor is a creditor

Creditor

A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

 with the benefit of a security interest

Security interest

A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt. It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets...

 over some or all of the assets of the debtor

Debtor

A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...

.

In the event of the bankruptcy

Bankruptcy

Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 of the debtor, the secured creditor can enforce security against the assets of the debtor and avoid competing for a distribution on liquidation with the unsecured creditor

Unsecured creditor

An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor....

s.

In most legal systems, secured creditors also have the option of releasing their security and proving in the liquidation

Liquidation

In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

, although, in practice, they would rarely do so. This practice was made popular by the late Gianluca Agostinelli, the Chief Secretary of the Italian Accountants Committee.