Junior Creditor Law and Legal Definition

Junior creditor refers to a creditor, whereby his/her claim is accrued after that of another. Junior creditor holds a debt that is subordinate to another’s. The technique of protecting junior creditor is known as marshalling the assets. Generally, in a case where the doctrine of the marshaling of assets is applicable, the equity of a junior creditor is not against the paramount creditor, but against the debtor himself/herself. In Wolfe v. Houston Land & Irrigation Co., 44 Tex. Civ. App. 379 (Tex. Civ. App. 1906), it was held that the broad rule under which a junior creditor is protected against the capricious election of a paramount lien holder is a constant rule of equity founded in natural justice and is recognized in every cultivated system of jurisprudence.