Preferential creditor

Okay kiddo, let's say you're playing with your toys and your friend Johnny comes over to your house. Johnny really likes your new toy truck and he asks to borrow it. You say yes and give it to him to play with.

Later on, it's time for Johnny to go home and he forgets to give you back your toy truck. You ask him for it but he says he lost it.

Now, you're really sad because that was your favorite toy truck and you don't have another one like it.

In grown-up world, we sometimes loan our money or things to other people like Johnny. If someone can't pay back the money they borrowed from us, we can try to get our money back by going to court.

But sometimes, even if we win in court, we might not get all of our money back. That's where the idea of a preferential creditor comes in.

A preferential creditor is a person or company that has loaned money to someone else and is considered more important than other people who also loaned money.

Think of it like this: if you and all your friends loaned Johnny some money and he can't pay any of you back, but one of your friends loaned him more money, that friend is considered a preferential creditor because they get paid back first.

It's kind of like you really wanted your toy truck back, but Johnny only had enough money to buy a new one for the person who loaned him the most money.

This might not seem fair, but it's a way to make sure that people who loan a lot of money to others are more likely to get their money back.