How does a purchase money mortage work in the case of bankruptcy? - ProProfs Discuss
Advertisement

How does a purchase money mortage work in the case of bankruptcy?

Asked by HAYES, Last updated: Nov 30, 2021

+ Answer
Request
Question menu
Vote up Vote down

1 Answer

John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Your company buys property but finances the deal through the seller and not the bank.the seller has first claim on the property.you later go bankrupt because you defaulted on some bond payments and cant meetyour financial obligations. as youve already learned, bondholders will lay claim to thespecific assets by which their securities are secured. and since bondholders anddebenture holders rank ahead of all referred shareholders and common shareholders,all debt obligations will be satisfied before equity owners are paid a single penny.however, with the purchase money mortgage, only one debt holder has claim on theproperty, and thats the one who sold the property and financed the deal. that meansthe particular property in question is not something that other bond holders/debentureholders will be entitled to in order to satisfy their claims.
upvote downvote
Reply 

Advertisement
Advertisement
Search for Google images Google Image Icon
Select a recommended image
Upload from your computer Loader
Image Preview
Search for Google images Google Image Icon
Select a recommended image
Upload from your computer Loader
Image Preview
Search for Google images Google Image Icon
Select a recommended image
Upload from your computer Loader

Email Sent
We have sent an email to your address "" with instructions to reset your password.