A debt that is secured by collateral whose value is less than the debtor owes (the debt). In words, from the creditor’s perspective, a debt is, or becomes, undersecured when the value of collateral posted to secure the debt is lower than the total amount of the claim. From the debtor’s perspective, the obligation owed to the creditor has a higher value than the collateral posted by the debtor to secure the amount of debt.
For example, if a mortgage loan is extended at a value of $200,000 on a house with a value of $180,000 is is an undersecured debt.
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