creditor hierarchy

Creditor hierarchy refers to the order in which creditors are paid during a company's liquidation or bankruptcy. It typically starts with secured creditors, who have collateral backing their loans. Next are unsecured creditors, including suppliers and employees owed wages. After them come subordinated creditors, who have a lower priority claim. Finally, shareholders receive any remaining assets. This hierarchy ensures that those with the strongest legal claims to the company's assets are compensated first, reflecting the risk associated with the type of credit they provided. Understanding this order is crucial for investors and businesses involved in financial transactions.