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Secured Claim

Under BRA s506, a claim is secured to the extent that the creditor has a lien on property worth at least as much as the debt. For example, if a debt of $100 is secured by an interest in property worth $100, then the debt is fully secured and the creditor has a secured claim in the amount of $100. If, on the other hand, the property securing the debt is worth only $75, then the creditor has a secured claim in the amount of $75. The remaining $25 is unsecured. In such a case the creditor has two claims, a secured claim for $75 and an unsecured claim for $25. A lien may be obtained by agreement, in which case it is a security interest, or by litigation, in which case it is a judicial lien, or by operation of law, in which case it may be a statutory lien. The treatment of secured claims and unsecured claims is dealt with in the topic of Asset Distribution.