Homework Answers
When a corporation is liquidated in the U.S., its creditors are paid in a particular order, as required by Section 507 of the Bankruptcy Code. Secured creditors including secured bondholders get first priority. Secured creditors gave loans based on physical pieces of property. These are debts like the mortgage on company buildings, leases on company cars and loans for unpaid pieces of equipment.Next in line are unsecured creditors, which generally include the company's suppliers, employees, and banks. Stockholders are last in line.
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So the correct answer is Option-a: Mortgage Bond Holders.
They are the investors who will get paid first when the issuing company is going bankrupt.
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Note:
A mortgage bond is a debt offering that is secured by the issuing entity's real estate or equipment. If the issuer defaults on the bond, the property collateral is paid over to the bond holders.
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