Ranking of creditors: who has priority?
To claim payment of amounts owed following the bankruptcy of a company or organization, a creditor must file a claim with the bankruptcy trustee after the bankruptcy has been declared. The bankruptcy trustee places the creditor on a list of provisionally recognized creditors and determines the ranking of creditors on the basis of the type of claim. The higher in the ranking a creditor is, the greater the chance that a claim will be settled.
Ranking of creditors in the event of bankruptcy
The ranking of creditors in the event of bankruptcy consists of four categories: claims against the estate, preferential claims, unsecured claims and non-verifiable claims. This ranking is determined by law and is particularly important when not all debts can be paid from the bankruptcy estate. Within the ranking of creditors, preferred creditors always take precedence over unsecured and subordinated creditors. An exceptional position is reserved for claims of secured creditors with collateral security. Secured creditors can recover claims directly from the debtor’s assets.
Creditors and claims against the estate
Claims against the estate are debts that have arisen after the bankruptcy proceedings and after the debtor has been declared bankrupt. Examples of claims against the estate are obligations assumed by the bankruptcy trustee for managing and liquidating the estate. This includes the salary of the bankruptcy trustee and the rent that must be paid from the date of the liquidation order. Creditors with claims against the estate are at the top in the ranking of creditors. These debts will be paid first, provided there are sufficient funds in the bankruptcy estate.
What are preferred creditors?
The Employee Insurance Agency, the tax authorities and employees with a claim for wages, dating from before the declared bankruptcy, are preferred creditors in a bankruptcy and are the next parties in the ranking of creditors. Outstanding debts to these parties are settled before the claims of other creditors, such as unsecured creditors and subordinated creditors.
What are unsecured creditors?
Unsecured creditors are creditors without priority in bankruptcy. In many cases, these are suppliers who provided services or goods before the debtor’s bankruptcy was declared. These ‘ordinary’ creditors have not had any security provided, for example, in the form of a right of pledge or mortgage, and will have their claims dealt with later, in accordance with their position in the ranking of creditors. In many cases, these claims are settled only partially or not at all. At the bottom of the ranking are subordinated creditors. These creditors, such as shareholders, are only eligible for payment after all other creditors.
Claims from secured creditors in bankruptcy
An exception is made for secured creditors within the ranking of creditors. Claims from this group of creditors, such as banks, are paid in every situation and are independent of bankruptcy. Examples include debts in the form of a right of pledge, right of retention and right of mortgage. Claims from secured creditors in bankruptcy, for example, a claim from a mortgage creditor, remain in place in any situation and are immediately due and payable, without the intervention of the bankruptcy trustee.
Ranking of creditors: how strong is your position?
Are you faced with the bankruptcy of a debtor and do you want to know how you can increase your chances of successfully recovering outstanding debts? The specialists in bankruptcy law and insolvency law at Fruytier Lawyers in Business will give you pertinent legal advice about your position in the ranking of creditors. Our firm regularly acts as bankruptcy trustee, which means we can provide you with legal assistance throughout the process and contribute to strengthening your position as a creditor.