The ranking of creditors under Maltese law

Abstract

The Civil Code enunciates the general Pule in Section 2098 that "whoever has "bound himself personally is obliged to fulfil his obligations with all his property, present and future". The ranking of creditors comes into play only when such property, present and future, of the debtor fails to satisfy the various claims of all his creditors, It is obvious that if the debtor's estate is large enough to meet all his obligations, there can be no scope for creating a relationship between all the creditors that allows them to compete the one against the other. All are sure of ultimately being paid, albeit in the order of preference chosen by the debtor who is still completely in control of his affairs. And hence, those creditors who have acted cautiously and created for themselves or on whom the law itself has conferred, a right of preference in extending their credit to the debtor will, in this case, have no special rights as against the debtor or any of the other creditors of the debtor; all the creditors, whether privileged, hypothecary or simple, are equal and the debtor's property is their common guarantee. When, on the contrary, the assets of the debtor are insufficient to guarantee the claims of all the creditors, the latter may require an added guarantee to secure the payment of their credits: such is the function and purpose of privileges and hypothecs, which confer on the persons in favour of whom they are constituted a right to be preferred over all the other creditors of the same debtor. Such persons, therefore, to a greater extent, manage to avoid the consequences of the debtor's insolvency vis-a-vis their claims.