In general, how much do unsecured creditors receive from a liquidation? How much do stockholders receive?

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In general, how much do unsecured creditors receive from a liquidation? How much do stockholders receive?

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In general, how much do unsecured creditors receive from a liquidation? How much do stockholders receive?

Explanation & AnswerSolution by a verified expert

Explanation

Unsecured creditors are general creditors and are paid after priority claimants are paid. They are paid in full if there are sufficient funds to pay all the general creditors in full. If enough funds are not available, then they are paid on a pro-rata basis. If they are subordinated to any other creditor, then the amount they receive as pro-rata allocation has to be turned over to the creditor they are subordinated to. Unless the creditor they are subordinated to is paid in full, they receive nothing.
 
Shareholders are not the part of general claimants. They are last in the priority of claims. Hence they receive any amount left after all the priority claimants and general creditors are paid in full

Verified Answer

Unsecured creditors receive the pro-rata claim of their funds as allocated to other creditors unless they are subordinated to any other creditor. They may also receive the full amount of their claims if there are enough funds to pay all the creditors.
 
Shareholders receive any amount left after all the priority claimants and general creditors are paid in full.

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