Archive for the ‘US Bankruptcy Code – Chapter – 11’ Category

US Bankruptcy Code – Priority

In cases a business or a company files a case with the US bankruptcy court under US Bankruptcy Code chapter – 11, the chapter that provides the debtor wiht the option for reorganization of the company or the business in order to help repayment of the existing debts of the petitioner with the creditors, has an important feature, that is a worth to look at for both the debtor and the creditors of the company or business alike.

Chapter- 11 Priority

The chapter – 11 of the US Bankruptcy Code like the other chapters of the US Bankruptcy Code, has a provision to prioritize the creditors bases on some considerations. The chapter – 11, states that a debtor, when repaying the debt, under the guidance of a US bankruptcy court, must payout to each creditor maintaining a certain order of preference of priority, which is determined by the court itself.
The chapter – 11 dictates to the debtor that the creditor with the highest priority must be paid off in full first before switching on to the creditor who is next in the priority queue. As a rule of thumb, the creditors who have a security interest or are otherwise known as secured creditors will always recieve a higher priority than the other creditors also otherwise known as unsecured creditors.