A preferential creditor is a creditor

Creditor

A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

 receiving a preferential right to payment upon the debtor's bankruptcy

Bankruptcy

Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 under applicable insolvency laws.

In most legal systems, some creditors are given priority over ordinary creditors, either for the whole amount of their claims or up to a certain value. In some legal systems, preferential creditors take priority over all other creditors, including creditors holding security

Security interest

A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt. It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets...

, but more commonly the preferential creditors are only given priority over unsecured creditor

Unsecured creditor

An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor....

s. Some legal systems operate a hybrid approach; in the United Kingdom

United Kingdom

The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 preferential creditors have priority over secured creditor

Secured creditor

A secured creditor is a creditor with the benefit of a security interest over some or all of the assets of the debtor.In the event of the bankruptcy of the debtor, the secured creditor can enforce security against the assets of the debtor and avoid competing for a distribution on liquidation with...

s whose security is in the nature of a floating charge

Floating charge

A floating charge is a security interest over a fund of changing assets of a company or a limited liability partnership , which 'floats' or 'hovers' until conversion into a fixed charge, at which point the charge attaches to specific assets...

, but creditors with fixed security take ahead of the preferential creditors generally.

Classes of preferred creditors

Creditors who are characteristically preferred creditors are:

• employees
• revenue authorities
  Tax
  To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
  
  
• in some countries, environmental clean-up costs
• in some countries, tort
  Tort
  A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
  
   victims

In the United Kingdom employees are preferential creditors for their wages (subject to a statutory limit), as are occupational pension schemes. The right of the Crown as a preferential creditor was removed by the Enterprise Act 2002

Enterprise Act 2002

The Enterprise Act 2002 is an Act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy.-Structure:*Part 1 The Office of Fair Trading...

.

Creditors, and sometimes individual assets, are also placed in classes by specific laws for specific events, such as a deposit insurance

Deposit insurance

Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due...

 scheme triggered by a bank failure. For example, Switzerland

Switzerland

Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....

's deposit protection has Class I (first-class), Class II (second-class) and Class III (third-class) unsecured creditors.

Admiralty claims

In admiralty law

Admiralty law

Admiralty law is a distinct body of law which governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities which operate vessels on the oceans...

, many legal systems accord certain claims preferential status where a ship is subject to arrest. These claims vary from country to country, but commonly include:

• salvage
  Marine salvage
  Marine salvage is the process of rescuing a ship, its cargo, or other property from peril. Salvage encompasses rescue towing, refloating a sunken or grounded vessel, or patching or repairing a ship...
  
  claims
• seaman's wages
• moorage fees