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 Louisiana, when a person or business obtains credit, the arrangement can be either secured with collateral or unsecured. Secured transactions involve the borrower pledging assets as security for the loan. If the borrower defaults, the lender may use legal processes such as attachment or repossession to claim the pledged assets. For instance, a bank may require a business to secure a loan with property or equipment. On the other hand, unsecured transactions do not involve specific collateral. Credit cards are a common example of unsecured credit. While unsecured creditors do not have an initial claim to the borrower's assets, they can still pursue legal action to collect outstanding debts. The law governing these transactions in Louisiana, as in most states, is based on the Uniform Commercial Code (UCC), which provides a standardized set of rules regarding secured transactions.