Regarding the estate of a deceased person, the absolute priority rule will ensure payment of outstanding debts before the distribution to beneficiaries.
Also known as "liquidation preference".
Absolute priority specifies the pecking order. Senior creditors always get first grabs at the proceeds from liquidation, and shareholders are the last to get paid. This rule provides a degree of protection to creditors in the event of insolvency or death. The division of benefits (cash) is not always the result of a bankruptcy. It can also occur due to the liquidation of assets in order to pay down a company's liabilities.
In estate cases if the resources of the estate are insufficient to pay off the debts, assets will need to be liquidated to handle the obligations.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
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