When a person or business borrows money, or purchases or leases goods on credit (without paying the full purchase price up-front), the credit extended to the borrower (1) may be secured/collateralized by money or other assets, or (2) may be unsecured. For example, if your business takes out a loan from the bank, the bank will likely require you to pledge certain assets as security or collateral for the loan—and if you default on the loan, the bank may use the legal process (attachment, repossession) to gain ownership of those pledged assets to satisfy the debt.

Other transactions in which a creditor extends credit to your business may be unsecured—such as the bank that issues your business credit card without requiring you to pledge specific assets as collateral in case you fail to make the payments. But even an unsecured creditor can file a lawsuit against you or use other means to collect the debt you agreed to repay. The law of secured transactions is generally governed by the uniform commercial code (UCC), which has been adopted and made the law in some form in most states.

In Kansas, as in most states, the law of secured transactions is governed by Article 9 of the Uniform Commercial Code (UCC), which has been adopted into state law. When a business or individual borrows money or obtains goods on credit, the creditor may require collateral to secure the debt. This means that the borrower pledges assets, which could be repossessed or foreclosed upon if the borrower defaults on the loan. For example, a bank may require a business to pledge equipment or real estate as security for a loan. If the business fails to repay, the bank can use legal processes such as attachment or repossession to claim the pledged assets. On the other hand, unsecured transactions do not involve specific collateral. Creditors of unsecured debt, such as credit card issuers, do not have a direct claim on the borrower's assets. However, if the borrower defaults, the unsecured creditor can still pursue legal action, such as filing a lawsuit, to collect the outstanding debt. It's important for businesses to understand the terms of any credit agreement and the implications of both secured and unsecured debt under Kansas law and the UCC.