Which of the following statements is correct?
A)unsecured debts must be paid before secured debts
B)secured debts must be paid before unsecured debts
C)all shareholders must be paid in full before creditors receive any payment
D)none of the above

Question

Quizplus · Accepted Answer

Secured debts have collateral tied to them, such as a mortgage or car loan, and the creditor has the right to seize that collateral if the debt is not paid. Therefore, they are usually given priority over unsecured debts, which do not have collateral. Option A is incorrect because unsecured debts are usually ranked lower in priority than secured debts. Option C is incorrect because shareholders are usually the last to receive payment in the event of bankruptcy or liquidation, after all debts and other obligations have been paid.

Which of the Following Statements Is Correct