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LawLiquidation Preference
By erocker91
Category: Law. Viewed 452 times. Created December 2014.     Disclaimer.   
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Run through the liquidation of a company's assets to creditors

               
Is there a security interest in any asset?
 
 
 
 

YES








Is the asset worth more than the secured debt?
NO
Distribute the full value of the asset to the secured creditor and treat him like a general unsecured creditor for the remainder of the distributions owed to him.
Is there a priority unsecured creditor?
NO
Is any general unsecured creditor subordinated to any other?
NO
Distribute all remaining value pro rata amongst subordinated unsecured creditors.


YES



YES


YES


 
Distribute the value of the asset to the creditor, up to the amount of the security interest. The remaining value should be placed into the general asset pool.
Use the remaining assets to fully repay the priority unsecured creditor. The remaining value should be returned to the general asset pool.
Distribute value pro rata, giving the senior creditor any value that would otherwise go to the creditor subordinated to him. Any remaining value should be added back to the general asset pool.