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Simple English definitions for legal terms
secondary creditor
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A quick definition of secondary creditor:
A creditor is someone who is owed money or goods by another person or entity. They have a claim that can be adjusted and paid off. A secondary creditor is a creditor whose claim is not as important as a preferred creditor's claim. For example, if someone owes money to two different creditors, the preferred creditor will be paid first, and the secondary creditor will be paid after.A more thorough explanation:
A secondary creditor is a person or entity who has a claim against a debtor, but their claim is not as important as the claim of another creditor. This means that if the debtor cannot pay all their debts, the secondary creditor will only receive payment after the preferred creditor has been paid in full.
For example, if a company owes money to two creditors, one of whom has a secured claim and the other has an unsecured claim, the secured creditor is the preferred creditor and will be paid first. The unsecured creditor is the secondary creditor and will only receive payment if there is any money left over after the secured creditor has been paid.