In the liquidation order, secured debt is positioned where relative to general creditors?

In the context of liquidation order, secured debt holds a higher priority compared to general creditors. When a company undergoes liquidation, the assets are sold off to pay debts. Secured creditors are those who have collateral backing their loans, meaning they have specific assets tied to the debt. This gives them a preferential status during the distribution of assets.

In a liquidation process, secured creditors are paid first from the proceeds of the sale of the collateralized assets. If funds remain after all secured debts have been settled, then general creditors, which include unsecured debts, may receive payment. Unsecured creditors do not have a specific claim on assets and therefore are at greater risk and typically receive payment only if there are sufficient funds after secured debts have been cleared.

Understanding the order of priority is crucial for determining how assets will be allocated in a liquidation scenario, highlighting why secured debt ranks higher than general creditors.