Which of the following types of liabilities has the lowest priority of claims in bankruptcy proceedings?

• A. Secured liabilities
• B. Subordinated debt
• C. Common stockholders' equity
• D. Unsecured liabilities

Answer: (C)

Verified step by step guidance

1. Understand the hierarchy of claims in bankruptcy proceedings. In bankruptcy, creditors and claimants are paid in a specific order of priority, starting with secured liabilities, followed by unsecured liabilities, subordinated debt, and finally equity holders.
2. Define secured liabilities. These are debts backed by collateral, meaning the creditor has a legal claim to specific assets if the debtor defaults. Secured liabilities have the highest priority in bankruptcy proceedings.
3. Define unsecured liabilities. These are debts not backed by collateral, such as credit card debt or medical bills. They are paid after secured liabilities but before subordinated debt and equity holders.
4. Define subordinated debt. This is a type of unsecured debt that ranks below other unsecured liabilities in terms of priority. Subordinated debt holders are paid only after higher-priority unsecured creditors are satisfied.
5. Define common stockholders' equity. Equity holders are the owners of the company and have the lowest priority in bankruptcy proceedings. They are paid only after all creditors (secured, unsecured, and subordinated) have been satisfied, making their claims the least prioritized.