Filing a Bankruptcy Proof of Claim as a Secured Creditor
Filing a Bankruptcy Proof of Claim as a Secured Creditor In the event of a debtor’s bankruptcy, secured creditors are paid before unsecured...
2 min read
wpengine Dec 23, 2014 12:00:00 AM
As a credit professional, you’ve likely heard this once or twice: “It’s better to be a secured creditor than an unsecured creditor.” After all, credit is how the majority of us do business in today’s economy and, as credit professionals, we want to insure we are paid for the goods & services we provide.
I often hear secured-credit-skeptics say “If my customer files bankruptcy, I won’t see a dime, why waste my money on a UCC or lien” or “Once the courts get paid, there won’t be anything left for me” and, my favorite, “My customer and I have a great relationship, they’ll never fail & I will always get paid.”
As with everything in life, there are no guarantees – with the exception of death and taxes. No, you are not guaranteed to be paid in the event your customer files bankruptcy; however a perfected UCC filing will make you a secured creditor, which would put you in the best possible position to get paid.
The bankruptcy code is specific, detailed and, well…it’s long – but here is the basic payout priority:
Payout Priority in Chapter 11 Bankruptcy
Yes, creditors really do get paid – although every bankruptcy exit plan is different. Let’s take a look at a few bankruptcy cases, which demonstrate the immense benefit of being a secured creditor rather than an unsecured creditor.
Although there are no guarantees, time and time again we see secured creditors receiving more funds than unsecured creditors.
The information presented here illustrates that secured creditors are in the best possible position to get paid. However, this assessment does not guarantee a payout in future bankruptcies.
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