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Absolute priority, also known as "liquidation preference," is a rule governing the order of payment among creditors and shareholders in the event of a corporate liquidation. The absolute priority rule is used in corporate bankruptcies to decide the portion of payment that will be made to each participant.
A secured creditor is any creditor or lender associated with an issuance of a credit product that is backed by collateral. Secured credit products are backed by collateral. In the case of a secured loan, collateral refers to assets that are pledged as security for the repayment of that loan.
However, each of your creditors must file a proof of claim (described below) within a certain time to prove how much you owe. If a creditor fails to do so, then the bankruptcy trustee will not make any payments to that creditor. In some cases, lack of a proof of claim may benefit you.
Most bankruptcy cases pass through the bankruptcy process with little objection by creditors. Because the bankruptcy system is encoded into U.S. law and companies can prepare for some debts to discharge through it, creditors usually accept discharge and generally have little standing to contest it.
Creditors rarely show up. Credit card and medical debt collectors basically never appear. In 1% to 3% of the hearings, a bank representative who loaned you money (e.g., for a business or a car), a former business partner, or an ex-spouse may attend the hearing.
Instead, they process the bankruptcy notice along with the thousands of others they get each year without an ounce of emotion about it. So if you are sitting at home and wondering what creditors think when you file bankruptcy, they don't think much about it.
Generally speaking, the debtor's creditors are paid from nonexempt property of the estate. The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors.
Miss just one and your case may be dismissed. The good news is that if you ? or the attorney you hire ? gets the paperwork right and the case moves through the court to the point where debt discharge is determined, the U.S. Bankruptcy Courts says that 99% of Chapter 7 cases succeed.