In liquidation of a limited partnership, which group receives asset distribution first?

In the liquidation of a limited partnership, secured creditors receive asset distribution first. Secured creditors are those who hold claims backed by collateral, such as a mortgage on property or a lien on assets. Their claims take priority over other types of creditors because they have specific rights to certain assets in the event of liquidation.

This priority is important because it helps ensure that entities that have secured their loans with specific collateral are compensated before unsecured creditors, limited partners, or general partners receive any distribution. Following secured creditors, the distribution typically proceeds to unsecured creditors, and thereafter to the equity holders, which includes limited partners and general partners, based on their respective ownership interests. This order is a standard procedure in bankruptcy and liquidation scenarios, ensuring that the claims of secured stakeholders are settled first to mitigate their risk.