A person who is owed money or, alternatively, possesses an outstanding financial claim against a debtor. There are generally four distinct categories that creditors fall into. In this definition, we have organised these categories in order of priority.
Trust Creditor: The debtor holds the property or monetary amount in trust, decided by special status under legislation
Secured Creditor: When a security interest is held as collateral to the same value of the outstanding debt
Preferred Creditor: A unsecured creditor that will be given priority during the bankruptcy process
Unsecured Creditor: A provider of credit who possesses no security interest with the debt owed to them. They are also unrecognised by the Bankruptcy and Insolvency Act
The order is significant as it indicates preferential status during bankruptcy claims. Insolvency legislation dictates the order of priority that creditors fall into. Though there is no completely agreed-upon definition for ‘creditor’, it ultimately refers to a person to whom an amount is owed.
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