Preferred Creditor

Your parents. A kindly uncle. A chipper, generous banker with terrible organizational skills and an impaired memory, who might just forget they gave you any money. Those would be our preferred creditors.

But this term doesn't refer to the people we most want loaning us money. It represents the people who get paid back first, especially if things go south.

A preferred creditor gets the first place in line in the case of a bankruptcy. The distinction gives the creditor dibs on any cash recovered from a liquidation. The title doesn’t just go to particular lenders. Sometimes, the legal system designates some organizations as top of the collection food chain; for instance, tax authorities often get first shot.