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ARTICLE · 02 OCTOBER 2016

Secured creditors beware: How to avoid surrendering a security in liquidations

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Secured creditors should be careful not to surrender their security when lodging a PoD and voting at creditors meetings.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Murray Thornhill
Murray Thornhill
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Introduction

Secured and unsecured creditors alike are often advised to lodge a proof of debt ('PoD') as soon as possible after a debtor company goes into liquidation. Secured creditors often presume that they are able to vote at any creditors' meeting without their rights being affected. In both of these instances however, a secured creditor runs the risk of surrendering their security interest. Secured creditors should therefore be careful and seek legal advice before lodging a PoD and voting at creditors meetings.

Points secured creditors should keep in mind when lodging a PoD and voting

  1. Generally, a secured creditor should not lodge a PoD in relation to that part of the debt which would be satisfied by the estimated value of the security (ie the secured part of the debt).

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