Preferential or unsecured creditor

Preferential creditor

A preferential creditor is a creditor receiving a preferential right to payment before other creditors in the event of a bankruptcy. There are two types of preferential rights: on the one hand, the legal privileges conferred directly by law (employees of a company within the scope of a bankruptcy or even the tax office), and on the other hand, privileges contractually agreed upon by the debtor (pledge, mortgage, security, etc).

Unsecured creditor

An unsecured creditor, also called ‘simple creditor’, is a creditor with no guarantee of recovering their debt within the scope of the bankruptcy of one of their debtors. During the handling the bankruptcy’s assets, the unsecured creditor will be reimbursed after all the preferential creditors have had their rights restored. With no preferential right to payment, the unsecured creditor enters into competition with all the other creditors of their debtor and will be paid using the remaining balance of the bankruptcy according to the amount of their debt.

Updated 4/9/2017

Definitions provided under this section refer to the Belgian situation; unless specified otherwise. The texts are meant to summarize concepts in daily language and should not be considered as comprehensive or definite. We welcome suggestions for modifications or additions at glossary@tcm.be.