creditors' hierarchy

The creditors' hierarchy determines the order in which lenders are paid if a company or individual owes money and cannot fully settle their debts. Secured creditors, who have collateral backing their loans (like a mortgage or car loan), are paid first from that specific asset. Unsecured creditors, such as suppliers or credit card companies, are paid afterward, often from remaining assets. If assets are insufficient, some creditors may only receive a portion or nothing at all. This hierarchy ensures a fair and organized process for distributing available assets among creditors based on their legal rights and the nature of their claims.