SIE (Securities Industry Essentials) Practice Exam

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Who has the highest priority claim in a Chapter 11 bankruptcy proceeding?

Unsecured creditors
Stockholders
Secured debt holders
Government tax claims

The correct answer is: Secured debt holders

Secured debt holders have the highest priority claim in a Chapter 11 bankruptcy proceeding because they have a lien on the debtor's property that serves as collateral for their loan. This means that if the debtor cannot pay back the loan, the secured debt holders have the right to take possession of the collateral and sell it to recover their loan amount. In comparison, unsecured creditors, stockholders, and government tax claims do not have a specific asset to claim in the event of bankruptcy, making their claims less secure and therefore lower in priority.