company law

phani (Querist) 27 December 2010 This query is : Resolved
dear sir,
i am studing llm business law , i need to study kinds of creditors and their protection.
let me know please.
thanking you sir

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Advocate. Arunagiri (Expert) 27 December 2010
Broadly we can define the creditors in the following way:-

Secured creditors are creditors whose claims are guaranteed by some security in the bankrupt company’s property (accounts receivable, inventory or any other property). These creditors are not affected by the insolvent company’s bankruptcy since they can take possession of assets. However, they still need to prove their claim to the trustee in bankruptcy or in the court.

Preferred creditors are creditors, whose claims come second in priority of distribution. If property of the bankrupt company is insufficient to compensate all preferred creditors, the property is distributed proportionally to all preferred creditors. Preferred creditors become unsecured creditors for the rest of the uncompensated claims.

Unsecured creditors are the creditors whose claims are not guaranteed by any security in the bankrupt company’s property and do not have priority. If the property of the estate is insufficient to compensate all unsecured claims, the property is distributed proportionally to all unsecured creditors.

Deferred creditors are creditors whose wages are deferred for public policy reasons. Their claims can be compensated only after unsecured creditor’s claims are fully repaid. The deferred claims include back wages to bankrupt’s spouses and back wages to other relatives.