Section 61: Priority order of paying debt or liability

1) In carrying out or causing to be carried out the bankruptcy proceedings of the assets of a person pursuant to this Chapter, the debts to be paid or liabilities to be discharged by such a person shall be settled, on the basis of the following priority order, from the assets of such a person:

(a) Costs incurred in the carrying out of the bankruptcy proceedings,

(b) The liability of the secured creditor, who has provided debt against a pledge or mortgage, to the extent of such pledge or mortgage,

(c) Tax, fine to be paid to the Government of Nepal, Province Government or Local Government or other government charges and dues,

(d) Debts of the creditors other than those referred to in clause (b),

(e) Claim of the claimants other than those referred to in clause (b), (c) or (d).

2) In paying or setting off debts or liabilities pursuant to sub-section (1), if there is more than one creditor or claimant of the same priority order, the debt or claim shall be paid or set off on a pro rata basis from the assets bankrupted in proportion to the debt or claim of each creditor or claimant.

3) In paying the debts of the secured creditors pursuant to clause (b) of sub-section (1), if, after recovery of his or her debts from the assets pledged or mortgaged to him or her, there remains any portion or sum of such pledge or mortgage, other creditors or claimants may make a claim over such portion or sum.

Provided that if the secured creditor’s debts cannot be fully recovered from such assets, he or she cannot claim other property.