Definition of Preferred debt:
The main types of preferred debt include interest on mortgages, equity loans, and equity lines of credit. Any taxes owed to the IRS are considered a form of preferred debt as well.
Obligations, such as unpaid taxes or the first (senior) mortgage, that must be discharged before discharge of any other obligation of a debtor in liquidation.
Preferred debt is a financial obligation that is considered more important than–or make take priority over–other types of debt. For example, the first–or senior–mortgage would be considered preferred debt (when comparing the first and second mortgage). This form of debt obligation typically has to be paid first because it carries more significance than other types of debt. Interest on preferred debt is typically free from any taxes.
How to use Preferred debt in a sentence?
- First mortgages and taxes owed to the IRS are examples of preferred debt.
- Preferred debt is often classified as a higher priority than any other type of debt.
- For a business, the amount of preferred debt that it carries on its books, along with other liabilities, could affect its overall valuation and ability to secure additional financing.
Meaning of Preferred debt & Preferred debt Definition