What is a priority creditor?

A priority creditor is a creditor that is given priority status over other creditors when it comes to the repayment of debts. Priority creditors are given special consideration in the repayment of debts. In New York, priority creditors are given status in order to receive payment of their debt before other creditors through the distribution of a debtor’s assets. The priority status is usually given to governmental entities, such as the Internal Revenue Service or a state taxing authority. Priority creditors are typically secured by liens, which are legal encumbrances that give a creditor the right to seize or foreclose upon a debtor’s property if they fail to make their payments. Priority creditors may also be creditors such as health care providers, who often have statutory priority status. Priority creditors are typically in a much better position than other creditors in the repayment process. For example, if a debtor has insufficient funds to repay all of their creditors, priority creditors will be paid first and other creditors will receive whatever remains afterwards. In cases of liquidation, priority creditors also often receive a greater percentage of the payment for their debts than other creditors, as they are placed in a “first in line” position. This means that priority creditors will be paid before any other creditor when a debtor’s assets are liquidated.

Related FAQs

What is a claim of exemption?
What is a debtor’s exam?
What is a non-dischargeable debt?
What is an adversary complaint?
What is a discharge in bankruptcy?
What is a setoff action?
What is a fraudulent transfer?
What is the difference between a secured and an unsecured debt?
What is the meaning of “time’s up”?
What is a secured debt?

What is a priority creditor?

Related FAQs

Related Blog Posts