Marshalling Securities Law and Legal Definition

Marshalling securities is the process of organizing, ranking, and distributing funds or resources in a manner put forward by law as being the most effective way to discharge debts that are owed to various creditors.

Marshalling of securities is generally applied when one claimant has two possible funds in the hands of a debtor to whom the claimant is able to resort to satisfy his/her demand. If the second claimant has an interest in only one of the funds, the second claimant can force the first to satisfy the claims out of the fund in which he/she, the second claimant, has no lien. In other words, when a person has two funds by which his/her debt is secured, and a creditor has a claim only on one of these funds, a court of equity will compel the creditor having a double security to resort to that fund which will leave the other creditor his/her security. This is also called marshalling assets.

Marshalling of securities takes place in favor of simple contract creditors, and of legatees, devisees and heirs, and in a few other cases, but not in favor of the next of kin.