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Simple English definitions for legal terms
prior creditor
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A quick definition of prior creditor:
A prior creditor is someone who is owed money by another person or entity. They have a claim that came before any other claims and will be paid first if there is not enough money to pay everyone. For example, if someone owes money to two people and they can only pay one, the prior creditor will be paid first.A more thorough explanation:
A prior creditor is a person or entity who has a claim against a debtor that predates the order for relief concerning the debtor. This means that they have a higher priority in receiving payment from the debtor's assets compared to other creditors.
For example, if a company goes bankrupt and owes money to multiple creditors, the prior creditor who had a claim before the bankruptcy filing will be paid first from the company's assets before other creditors.
Another example is a mortgage lender who has a lien on a property. If the property owner defaults on the mortgage, the prior creditor (mortgage lender) has the right to foreclose on the property and sell it to recover the debt before any other creditors can make a claim on the property.
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