absolute priority rule
- A regulation that mandates the complete settlement of senior creditors' claims before any disbursements can be made to junior creditors within a Chapter 11 bankruptcy plan
- Under the absolute priority rule, the first-tier creditors must be paid in full before the second-tier creditors see a penny.
- The absolute priority rule was invoked to ensure that the senior creditors' claims were settled before distributions to junior creditors were made possible.
- The debtor company faced challenges in its reorganization due to the strict application of the absolute priority rule.