Unit 15 (OCMC) Bankruptcy & Insolency

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carla030698
carla030698 Registered Posts: 112 Dedicated contributor 🦉
in AAT Level 3 (Level 6 in Scotland)
In the collection of debts chapter when it talks about the order of distribution of assets when bankruptcy has been filled, what is the difference between Secured creditors and unsecured creditors???? :confused1:

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  • peugeot
    peugeot Registered Posts: 624 Epic contributor 🐘
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    Secured creditors are those which have their debt "secured". Security is normally in the form of a fixed and/or floating charge over the assets of the company. For example, secured debts could include a bank loan and the bank may have a fixed charge over a company's stock. In the event of winding up, the bank will exercise their charge and therefore the liquidator will settle the bank loan out of the liquidation proceeds. Secured creditors normally take preference over unsecured creditors in the event of a company being wound up.

    Unsecured are basically those creditors which do not have any form of security over their debts e.g. HMRC, normal trade creditors and such like.

    Kind regards
    Steve

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