absolute priority rule

Definition of "absolute priority rule"
  1. 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
How to use "absolute priority rule" in a sentence
  1. Under the absolute priority rule, the first-tier creditors must be paid in full before the second-tier creditors see a penny.
  2. The absolute priority rule was invoked to ensure that the senior creditors' claims were settled before distributions to junior creditors were made possible.
  3. The debtor company faced challenges in its reorganization due to the strict application of the absolute priority rule.

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