In liquidation, which has the highest priority?

• A. Senior Secured Debt
• B. Mezzanine Debt
• C. Preferred Stock
• D. Common Stock

Answer: (A)

In liquidation, who gets paid first is determined by seniority and whether the claim is secured by collateral. Secured creditors have the strongest position because their debt is backed by a lien on specific assets, so those assets can be sold to satisfy the debt before any other claims are considered. Among the options, senior secured debt combines two advantages: it is the highest-ranking debt (senior) and it is backed by collateral (secured). That means it has first claim on the assets available, before mezzanine debt, preferred stock, or common stock. Mezzanine debt is typically unsecured or subordinated to senior debt, preferred stock sits above common stock but after all debt, and common stock is last in line, receiving anything only if assets remain after all debts are paid. So the highest priority in liquidation is senior secured debt.