• Bondholders possess specific rights regarding payment of money due to them.cash image by Alexey Klementiev from Fotolia.com
  
  A Chapter 11 bankruptcy permits a business to reorganize its operations and restructure its debt, with the objective of satisfying most, if not all, of its debt, according to the U.S. Bankruptcy Code. A bondholder is an individual or other business that is in the position of a priority creditor in a Chapter 11 bankruptcy. This means that a bondholder's debt is paid off before most other creditors, in nearly all situations. As a bondholder, you possess specific rights in the bankruptcy proceedings.
  
  

Rights Over Other Existing Creditors

• A business in Chapter 11 bankruptcy typically has general creditors, secured creditors and priority creditors. Priority means that a particular creditor--in this case bondholders--are priority creditors and are entitled to obtain repayment of the debt due to them before general creditors. In addition, although a bondholder is not entitled to priority over a secured creditor's rights to collateral for a specific debt, in regard to other assets of the debtor, the bondholder retains priority.
  
  

Rights Over Shareholders or Other Owners

• Shareholders represent the legal owners of a corporation. A business can maintain other forms of ownership as well. No matter the ownership structure, a bondholder is entitled to be paid for outstanding debt before any money is paid to a shareholder during the course of Chapter 11 bankruptcy proceedings. In theory, shareholders or other owners should be at the end of the line when it comes to obtaining money through an Chapter 11 bankruptcy case.
  
  

Rights Over New Creditors

• The provisions of Chapter 11 of the U.S. Bankruptcy Code allows a business the ability to take on new debt during the course of the proceedings. In other words, if obtaining additional debt will assist a business in restoring a positive financial position, the court permits an increase in its debt obligations. The key to getting lenders to provide money to a business in bankruptcy includes granting these enterprises priority over most preexisting creditors. This means that a new creditor is entitled to payment before nearly all existing creditors. The one exception is a bondholder. A bondholder has the right to payment of what is owed pursuant to the bond even before a new creditor providing money to the business during the bankruptcy case.