Creditors can be unsecured or secured. An unsecured, or general, creditor has a general claim against a debtor, which is not secured by any particular asset of the debtor. An unsecured creditor has the weakest claim, which may go unpaid. However, an unsecured creditor may become a secured creditor after a lawsuit and judgment. A secured creditor, who has a claim on a particular asset, can use the court system to seize the asset and to satisfy the debt. This clearly presents a significant risk for the business owner.

How does a creditor become a secured creditor and obtain an interest in a debtor's property? These interests are referred to as liens against the property in question.

Certain liens can destroy asset protection planning, and this is how creditors get your assets, as illustrated in the explanations throughout this section. In order to know if your assets are at risk, it is imperative that you have an understanding of the different types of liens you may encounter as a small business owner:

• Consensual
  • Purchase-Money Security Liens
  • Non-Purchase-Money Security Liens
• Statutory
  • Mechanic's Liens
  • Tax Liens
• Judgment

With this as a backdrop, we'll then examine how creditors might seek to get your assets through these types of liens, and what you can do, as an individual and as a small business owner, to maximize your protection against those creditors.

The strategies outlined will address a broad spectrum of topics, from forms of property ownership to structuring debt to minimize exposure. The bankruptcy rules will play a large part in this, so be warned that Congress is currently considering legislation that would fundamentally change the rules relating to protecting assets by filing bankruptcy.