Zhang Jie Financial Observation | Exceptions to the subordinate nature of security interests should be noted in times of crisis

Today, we are once again focusing on legal issues, especially in the current context of increasing economic pressures, which are becoming more and more prominent. With the increase of economic contradictions, the creditor-creditor relationship has become more complex, and how to ensure the interests of creditor's rights has attracted much attention.

Many people generally believe that in a debt relationship, having collateral or collateral is a form of security. However, the reality is not so simple. Recently, we have noted that there have also been some exceptions to security interests. In particular, for some special claims, their guarantee and enforcement have priority over security interests.

Judicial interpretations in this regard can be found in the case studies. Take Yue Min Shen No. 7866 (2019) "Bank of China Co., Ltd. Foshan Branch, Foshan Gaoming District Labor and Personnel Arbitration Commission, a case of objection to enforcement by an outsider" as an example. The key issue in this case was whether the wage claim prevailed over the security interest in the course of enforcement. The gist of the court's adjudication stated that wage claims are special claims arising from labor contracts and should have priority over other claims in order to safeguard the employee's right to survival.

In addition, the exception to the security interest is intended to give due consideration to workers' wages and economic compensation, and at the same time clearly stipulates the principle that workers' wages are paid first. However, this does not apply in all cases. Against the backdrop of the current turmoil in the real estate market, the security of property collateral is also being questioned. Therefore, creditors must carefully assess the relevant risks and take appropriate measures.

To sum up, with the increasing uncertainty of the economic situation, the protection of creditor's rights is facing many challenges. Creditors should pay close attention to changes in the law and reasonably assess risks to ensure their own interests.