In the event of bankruptcy, what will an unsecured creditor likely receive?

An unsecured creditor is one that does not have collateral securing their debt—meaning they are not prioritized in the event of a bankruptcy. In a bankruptcy proceeding, assets are liquidated to pay off debts, and secured creditors (those with collateral backing their loans) are paid first. After secured creditors have been satisfied, any remaining funds are distributed among unsecured creditors.

Receiving a prorated share means that unsecured creditors will receive a portion of what they are owed, based on the total amount of funds available for distribution and the total claims made by all unsecured creditors. This distribution is typically not equal for everyone; rather, it is based on a percentage of each creditor's claim relative to the total claims. Thus, while unsecured creditors may not receive full compensation for their debts, the prorated share reflects the possibility of recovering part of what is owed depending on the available assets during the bankruptcy process.