In liquidation priority, which group is paid third?

• A. Subordinated debt holders
• B. Secured creditors
• C. Unsecured creditors
• D. Preferred stockholders

Answer: (A)

In liquidation, payments follow a fixed hierarchy based on claim priority. Secured creditors, who have collateral backing their loans, are paid first. After them, unsecured creditors are paid. Subordinated debt holders come next because their claims are lower in priority than other debt instruments. They are junior to both secured and unsecured creditors, so they receive payments only after those higher-priority creditors have been satisfied. Equity holders, including preferred and common stock, are last, and they are paid only if any assets remain after all debt has been addressed. Therefore, the group paid third is subordinated debt holders.