The credits in the contest are those that are classified according to the priority of payment , when the debtor has declared bankruptcy, so he cannot fulfill all his financial obligations.
When a company or individual recognizes their insolvency, they must call a bankruptcy . Said judicial procedure may be the initiative of the same borrower or of the authorities before the claim of the lenders . In this way, it seeks to ensure at least the reimbursement of the main financing received.
As of the official declaration of the insolvency, the creditors have thirty days to communicate the credits they have against the bankrupt company or person and the classification they intend for them.
Types of credits in the contest
The types of credits in the contest are the following:
- Privileged credits: Those that have preference over the rest. Then, when the bankrupt company is liquidated, these loans will be paid before the rest.
Within this category, general and special privileged credits can be distinguished . The former affect the entire capital of the company and are, for example, workers’ salaries and debts in favor of the government ( Social Security , taxes, among others).
Instead, special privileged credits are those covered by a particular asset. We refer, for example, to a mortgage where the guarantee is the same home. Thus, in case of default, said property will be transferred to the creditor to be sold.
- Ordinary credits: Those that have a medium preference. Here are debts that do not fall into any of the other two categories.
- Subordinated credits: They are those of minor importance and therefore their probability of collection is lower. Within this group are, for example, financial interests payable, fines and loans whose owners are related to the delinquent company (administrators, partners, etc).
Also considered in this category are those creditors who have acted in bad faith, for example, hampering the bankruptcy process.