Legal Definitions - preferred

In legal contexts, preferred describes something that is given a higher rank, special advantage, or priority over other similar things. This means it will be satisfied, addressed, or receive benefits before others that do not hold this status.

• Example 1: Preferred Creditors in Bankruptcy

  Imagine a small business files for bankruptcy and owes money to many different parties, including its employees for unpaid wages, a bank for a secured loan, and various suppliers for goods delivered. Under bankruptcy law, certain creditors are considered "preferred creditors." For instance, employees' claims for unpaid wages up to a certain amount are often given preferred status over general unsecured creditors like suppliers. This means that when the company's assets are sold, the employees' preferred claims will be paid out before the suppliers receive any payment.

  This example illustrates "preferred" because the employees' claims are accorded a legal priority, ensuring they are paid before other types of creditors.

• Example 2: Preferred Stock in a Corporation

  A company might issue different types of shares, such as common stock and preferred stock. An investor who owns preferred stock typically has certain advantages over common stockholders. For instance, preferred stockholders usually receive fixed dividend payments before common stockholders are paid any dividends. Furthermore, if the company were to be liquidated (its assets sold off), preferred stockholders would be entitled to receive their investment back before common stockholders.

  This example demonstrates "preferred" because the preferred stock possesses specific privileges, such as priority in receiving dividends and repayment during liquidation, over common stock.

• Example 3: Preferred Applicants for Government Benefits

  Consider a government program designed to provide housing assistance. The program might establish criteria where certain groups are given "preferred applicant" status. For example, homeless veterans or families with disabilities might be given priority in the application process for housing vouchers or subsidized apartments. This means their applications would be reviewed and processed ahead of other eligible applicants who do not fall into these preferred categories.

  This example shows "preferred" as specific groups are accorded a priority or special advantage in accessing government benefits, moving them to the front of the line.