Preferential creditors enjoy priority right to repayment from a bankrupt debtor’s assets ahead of ordinary unsecured creditors.
Types include:
- Employees for unpaid salaries, severance and benefits spanning the latest four months.
- Tax authorities for previously remitted payroll taxes remaining outstanding.
Example:
When a manufacturer collapsed with quarterly payroll levies and permanent worker entitlements in arrears, the labor fund’s claim as preferential creditor ensured speedy settlement before common creditors could access proceeds from liquidated assets.
Significance:
Shielding preferential claims aids social stability by protecting worker interests while revenue authorities’ speedy recompense supports continued public services—both fundamentally serve the greater societal benefit over narrowly self-interested ordinary creditors.