What is an unsecured creditor?

 

An unsecured creditor is a creditor who does not have security for their loan to a company. On liquidation of a company, the liquidator must follow a statutory order of payment when distributing the assets of the company. This statutory order of payment means that lenders with security for their loan, in the form of fixed or floating charges, and preferential creditors, will all get paid before unsecured creditors. While preferential creditors are a type of unsecured creditor, preferential creditors are paid before other unsecured creditors. On liquidation, a creditor solicitor can help with claiming money owed to an unsecured creditor and can also advise a company as to whom their unsecured creditors are.

It is unusual in a compulsory or Creditors' Voluntary Liquidation for unsecured creditors to be paid in full. Usually they will be paid a proportion of the money owed to them, for example, 80p for every £1 owed. As a result of their position in the statutory order of payment, an unsecured creditor will often lose money on their original investment. If you are an unsecured creditor who has not received payment in accordance with the terms of your loan, an insolvency expert can assist with applying for liquidation of a company. It is worth noting that the person applying for the liquidation of a company receives no benefit for doing so and will receive payment in accordance with the statutory order of payment.

If you would like to obtain legal advice on being an Unsecured Creditor or about what rights an unsecured creditor has, Caven can put you in touch with a local specialist creditor solicitor free of charge. So, if you have any questions or would like our help in finding local Creditor Solicitors please call us on 08001 221 2299 or complete the web-form above.

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