Corporate Bonds
Which creditor has first claim priority in a Chapter 11 bankruptcy proceeding?
Bankruptcy order: Secured creditors > Unsecured creditors > Preferred stock > Common stock.
Complete Analysis & Legal Rationale
Secured debt holders have the highest priority in bankruptcy because their claims are backed by specific collateral. The liquidation priority order is: secured creditors, unsecured creditors (including bondholders), preferred stockholders, and finally common stockholders. Common and preferred stock are last because they represent ownership, not debt.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.