In a corporate bankruptcy, who gets paid first?

In the event of a corporate bankruptcy, bondholders are prioritized when it comes to repayment. This hierarchy is rooted in the legal structure of corporate debt and equity.

Bondholders hold debt securities that represent a loan made by investors to the corporation. In a bankruptcy situation, these creditors have a claim to the company's assets before any equity holders. This is because bondholders are entitled to get their principal and interest payments before other forms of financing are considered, which includes preferred and common stock.

Preferred stockholders come next after bondholders, as they have a higher claim on assets than common stockholders but are still below bondholders in the payment priority. Common stockholders and general shareholders hold the lowest priority in terms of asset claims and typically receive payments only after all other debts, including bondholder and preferred stockholder obligations, are fully settled. Therefore, it is clear that bondholders have the first right to be repaid in the event of corporate bankruptcy, making this the correct answer.