A general creditor usually collects on a debt owed by an insolvent debtor by taking collateral from the debtor to sell for debt payment.

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A general creditor does not have priority to collect collateral from an insolvent debtor. In most cases, the collateral is distributed among secured creditors with higher priority, and the general creditor may only receive a portion or none of the proceeds. A general creditor may instead seek to collect on the debt through legal action or negotiation with the debtor.

A General Creditor Usually Collects on a Debt Owed by an Insolvent