A secured creditor needs a shortfall assessment before treating the whole debt as unsecured

Your claim may have more than one part

Another creditor applies to wind up your customer, and you believe your debt is secured. Before deciding how to participate, give the lawyer the security documents and current account. Ask about the actual rights, enforcement position and possible shortfall. Do not assume the entire debt should be treated as unsecured, or that having a security document guarantees payment in full.

Identify what supports the security

Imagine an equipment supplier holding documents relating to specific goods while part of the account concerns other supplies. Gather the agreements, registrations where relevant, asset details and payment history. Ask the adviser what the security actually covers and whether any issue affects it. A familiar account name does not establish that every invoice has identical protection.

Understand the shortfall concept

ASIC's liquidation guidance explains that a secured creditor may participate in an unsecured dividend for its shortfall after realising secured assets. Have the adviser assess the relevant figures and rights. That liquidation guidance does not determine your procedural role in the pending winding-up application. Participation in the court case and treatment of the claim in a liquidation are separate questions.

Source: ASIC: Liquidation, a guide for creditors

Use supported asset values

Provide available information about the assets, their location, condition and any competing interests. Distinguish an expected realisation from a book value or advertised price. In the equipment example, collection and sale costs may need consideration. Do not invent a precise shortfall simply to make a court or creditor document appear complete when the position remains under investigation.

Coordinate the options

Ask how any proposed security enforcement, settlement or involvement in the winding-up case could affect the overall position. Do not take possession or sell goods without appropriate authority and advice. Keep relevant deadlines active while the security assessment proceeds. The existence of another creditor's application does not make your own contractual and procedural questions disappear.

Give instructions from a reconciled position

Record the assessed secured exposure, potential shortfall and unresolved issues. Update the figures as reliable information becomes available. A clear split helps the adviser understand the commercial purpose of any proposed participation. It avoids treating the whole account as either fully protected or wholly unsecured when the actual arrangements may require a more careful assessment.