Secured Party Creditor vs Secured Party – Is There A Difference & Does This Matter?

There’s a lot of debate about the common source of confusion surrounding the terms ‘secured party creditor’ and ‘secured party’, and how the words ‘secured party creditor’ does not exist in the Uniform Commercial Code (UCC) written together that is. Many will dispute that the words ‘secured party creditor’ are invalid and don’t equate to anything.

In this blog post, we aim to bring clarity and awareness around these terms once and for all.

It is important to note that while you will not find the exact term “secured party creditor” in the UCC, the discussion around it often revolves around a play on words and interpretations.

First, let’s look at what is a secured party?

“Secured party” means a lender, seller or other person in whose favor there is a security interest, including a person to whom accounts or chattel paper have been sold. When the holders of obligations issued under an indenture of trust, equipment trust agreement or the like are represented by a trustee or other person, the representative is the secured party. See UCC 9-105.

The term “secured party” also refers to any of the following individuals or entities:

A person who has a security interest established or provided for in a security agreement, regardless of whether any outstanding obligation is being secured.
A person holding an agricultural lien.
A consignor.
A person who has acquired accounts, chattel paper, payment intangibles, or promissory notes through sale.
A trustee, indenture trustee, agent, collateral agent, or any other representative who has a security interest or agricultural lien established or provided for in their favor.
A person who holds a security interest that arises from Section 2401, 2505, 4210, or 5118, or under subdivision (3) of Section 2711 or subdivision (5) of Section 10508.

According to the Uniform Commercial Code (UCC) 9-102(a)(72), a secured party is a person or business that possesses a legal right to specific money and/or goods that belong to another individual or entity.

The Uniform Commercial Code is a set of laws governing commercial transactions in the United States. You can refer to Article 9 of the UCC, which deals with secured transactions, including the definition of a secured party.

Now, let’s define the word ‘Creditor’.

According to Black’s Law Dictionary 4th Edition, the word ‘creditor’ means a term of universal application to obligation due and to become due. A term used in taxation statutes to designate certain forms of personal property. It includes every claim and demand for money and certain sum of money receivable at stated periods, due or to become due, but not accrued rents to issue out of land.

Creditor under UCC § 1-201. General Definitions is defined as:

Creditor includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate.

What does ‘party’ mean?

According to Black’s Law Dictionary website, the term ‘party’ means “A person concerned or having or taking part in any affair, matter, transaction, or proceeding, considered individually. See PARTIES. The term “parties” includes all persons who are directly interested in the subject- matter in issue, who have a right to make defense, control the proceedings, or appeal from the judgment. Strangers are persons who do not possess these rights. Hunt v. Haven, 52 N. H. 162. “Party” is a technical word, and has a precise meaning in legal parlance. By it is understood he or they by or against whom a suit is brought, whether in law or equity; the party plaintiff or defendant, whether composed of one or more individuals, and whether natural or legal persons, (they are parties in the writ, and parties on the record;) and all others who may be affected by the suit, indirectly or consequentially, are persons interested, but not parties. Merchants’ Bank v. Cook, 4 Pick. 405.”

So, can one really be a secured party creditor?

It’s clear by now that the UCC clearly defines the roles of “secured party” and “creditor” separately. A secured party refers to a person or entity with a security interest in specific assets, while a creditor generally encompasses individuals or entities to whom a debt is owed. However, some interpretations or beliefs have emerged that attempt to combine these terms into the concept of a “secured party creditor.”

What is a secured party creditor?

Now that we have broken down the terms, let’s break down what a Secured Party/Creditor (SPC) is.

An SPC is someone who has undergone the process to correct their status from PUBLIC to private and taking control of their ESTATE. Being an SPC allows you to take control over your DEBTOR by placing it into a common law irrevocable trust and operating from the private, dejure sector with your status and standing.

In conclusion, this is all a play on words because at the end of the day, when completing the SPC process, you are becoming a secured party AND a creditor. This is where the combination of words comes from (and the source for major confusion!). Sure, we could change our package name to secured party AND creditor, but when we had a short period where we called it this, it seems to bring even more confusion into the space as this implies that there is a different process between these two terms and it also sounds like there’s a big difference between the two when really, they are all one in the same.

Is ‘Secured Party Creditor’ An Oxymoron?

While the term may sound redundant or contradictory at first glance, it is possible for a man or woman to be both a secured party and a creditor in certain legal contexts.

Under the Uniform Commercial Code (UCC) and other legal frameworks, a “secured party” refers to an individual or entity that holds a security interest in collateral to secure a debt or obligation. This security interest provides the secured party with certain rights and remedies if the debtor defaults on the debt.

A “creditor,” on the other hand, is a person or entity to whom a debt is owed. Creditors can be either secured or unsecured, depending on whether they hold a security interest in the debtor’s property.

In some situations, a secured party may also be a creditor if they are owed a debt by the debtor.

While the term “secured party creditor” may not be used extensively or formally in legal language, it is possible for these two roles to coexist in certain circumstances. The specific context and legal framework in which the term is used would determine whether it is appropriate or applicable.

So we hope this post brought clarity and put an end to the endless debate about the terms ‘secured party’ and ‘secured party creditor’. Combine the definitions together—secured party and creditor—and you will realize how and why these words become into three words together, despite it not being found together in the UCC.