A secured position in the Capital Stack retains the right to foreclose on a property in the event of a default, or non-performance. Secured creditors, such as a Senior Debt holder, or in some cases, a Mezzanine Debt holder, can initiate foreclosure proceedings to recoup the value of their investment.
Unsecured creditors do not have the right to foreclose on the property, and therefore have less collateral backing their investment claim.
Once all liabilities of an entity, such as a property, have been paid, unsecured creditors may claim their agreed upon portion of remaining equity. However, unsecured positions, such as Common Equity and some types of Preferred Equity, are rewarded with significant upside potential, a Preferred Return, or both, for their relative risk.