Absolute Priority

Absolute Priority

The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and stockholders may receive any payment.

Also known as liquidation preference.

Notes:

In other words, absolute priority specifies the pecking order. Senior creditors always get first grabs at the proceeds from liquidation. And, shareholders are the last people to get paid if a company goes under.

See also: Bankruptcy, Chapter 11, Chapter 7, Prepackaged Bankruptcy, Senior Security

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Absolute priority

Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.