There are many different types of creditors that a business may deal with, especially when declaring bankruptcy. Here are 6 different types of creditors and what to do if your business is struggling with debt.
1. Unsecured Creditors
The most common type of unsecured creditor is a credit card company. These creditors have no security interest in the property of the debtor.
2. Secured Creditors
These types of creditors typically have collateral, usually in the form of a lien on the property of the debtor.
3. Post-Petition Creditors
If a business is able to obtain credit from a creditor after filing for bankruptcy, this type of creditor is known as a post-petition creditor. Bankruptcy only covers debts that were accumulated before the bankruptcy filing, also known as “pre-petition” debts.
4. Judgment Creditors
A judgment creditor is a creditor that has sued the debtor for what is owed to them and have successfully obtained a judgment against the debtor before the bankruptcy petition was filed.
5. Creditors That Have Administrative Claims
Creditors that have administrative claims are often given priority during a bankruptcy because they have assisted the bankruptcy in some way. These types of creditors are often attorneys or accountants.
6. Creditors That Have Super Priority Claims
If there are special rules within the bankruptcy proceedings, this may give some creditors priority over all other creditors to be paid.
Why Is It Important To Distinguish Between Creditors?
During a bankruptcy, it is critical for a business to distinguish between creditors to determine who will be paid first. In some cases of bankruptcy, such as when a sole proprietorship files, some debts may be discharged. Determining which types of creditors have priority over others can ensure that the higher priority creditors are paid and only the lower priority creditors — such as unsecured creditors — are discharged.
When To Contact A Bankruptcy Attorney
If you sense that your business is struggling and you have more debts and payment obligations than you can meet, it may be time to consider business bankruptcy. At the Law Firm of Joel M. Aresty, P.A., we have worked with businesses both large and small during the bankruptcy process and can provide you with the expertise and resources you need for success. We know that bankruptcy is challenging, and we’re prepared to support and guide you every step of the way. Contact our office today for a consultation to discuss the needs of your business by calling 1-855 DOC LAWS.