The marshaling assets rule is a fair rule that states if an individual has debts to multiple creditors, they must prioritize using funds that are not accessible to the junior creditor to repay the senior creditor. This ensures that the senior creditor does not take all the money from the only fund accessible to the junior creditor, which would be unjust. It is also known as the marshaling doctrine, rule of marshaling securities, or rule of marshaling remedies.
The principle of marshaling assets is a legal rule that mandates a creditor with multiple sources of payment to prioritize the use of a payment source that is not accessible to a junior creditor. This rule aims to prevent a senior creditor from unjustly depriving a junior creditor of any payment. For instance, suppose a senior creditor holds a mortgage on a property while a junior creditor has a lien on the same property. If the property is sold, the senior creditor must first utilise any other available funds to settle their debt before utilizing the proceeds from the property sale. This ensures that the junior creditor will still receive some payment from the sale. Another example would be if a company possesses multiple assets that can be utilised to repay debts. If a senior creditor has a claim on one of those assets, they must first utilise the other assets to satisfy their debt before resorting to the asset that is also accessible to a junior creditor. The principle of marshaling assets is crucial in promoting fairness in debt repayment and preventing senior creditors from unjustly excluding junior creditors from receiving payment.
The Rule of Marshaling Assets is a legal principle that requires a creditor to exhaust all available collateral before seeking satisfaction from other assets of the debtor.
The Rule of Marshaling Assets applies when a creditor has a claim against a debtor who has multiple assets that could be used to satisfy the debt.
The purpose of the Rule of Marshaling Assets is to ensure that creditors are treated fairly and that they receive the maximum amount of satisfaction possible from the debtor’s assets.
The Rule of Marshaling Assets benefits creditors who have claims against a debtor with multiple assets.
If a creditor does not follow the Rule of Marshaling Assets, they may be prevented from seeking satisfaction from certain assets of the debtor.
The Rule of Marshaling Assets can be waived if the debtor agrees to it in writing.
The Rule of Marshaling Assets generally applies to secured debts, but it may also apply to unsecured debts in certain circumstances.
The Rule of Marshaling Assets may affect the priority of liens by requiring a creditor to satisfy a lower-priority lien before seeking satisfaction from a higher-priority lien.
The Rule of Marshaling Assets may be used in bankruptcy proceedings to determine the order in which creditors are paid.
If you have questions about the Rule of Marshaling Assets, you should consult with a qualified attorney who can provide you with legal advice and guidance.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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