Undersecured Creditor

A creditor whose collateral is worth less than its claim. If a lender is undersecured, its claim, for bankruptcy purposes, is divided into a “secured claim” equal to the value of its collateral and an “unsecured claim” for the deficiency. But see 1111(b) Election.

Bankruptcy Code § 506(a). See also Oversecured Creditor, Secured Claim, Unsecured Claim, Valuation of Collateral.

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