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Capital Absorption Risk · Debt service

Senior Debt

Definition

For the borrower, the first and usually largest debt-service obligation, which must be paid before junior lenders or owners receive anything. If secured, the lender's claim is treated as secured in bankruptcy up to the value of its collateral[2].

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

  1. Bankruptcy Reform Act of 1978, Pub. L. 95-598, § 101 (enacting 11 U.S.C. § 510), 92 Stat. 2549. Enforces subordination agreements that rank other debt behind senior debt (11 U.S.C. § 510(a)). Official text: govinfo.gov, U.S. Government Publishing Office.
  2. Bankruptcy Reform Act of 1978, Pub. L. 95-598, § 101 (enacting 11 U.S.C. § 506), 92 Stat. 2549. Treats a claim as secured to the extent of collateral value (11 U.S.C. § 506(a)). Official text: govinfo.gov, U.S. Government Publishing Office.

Also defined as