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 meet all his financial obligations.
When a company or individual recognizes its insolvency, it must call for bankruptcy. Said judicial proceeding may be the initiative of the borrower himself or of the authorities upon the claim of the lenders. In this way, it seeks to ensure at least the reimbursement of the main financing received.
From the official declaration of the bankruptcy, 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: They are 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 all the capital of the company and are, for example, workers’ wages 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 house. Thus, in the event of default, said property will pass into the hands of the creditor to be sold.
- Ordinary credits: They are those that have a medium preference. Debts that do not fall into either of the other two categories appear here.
- Subordinated credits: They are the least important and therefore their probability of collection is lower. Within this group are, for example, financial interest payable, fines and loans whose owners are related to the delinquent company (administrators, partners, etc.).
Creditors who have acted in bad faith, for example, hindering the bankruptcy process are also considered in this category.