Foreign Creditor vs Secured Creditor in Turkey: Who Gets Paid First From Company Assets? – 2026 Updated Guide

Learn who gets paid first from Turkish company assets when a foreign creditor competes with a secured creditor, including mortgages, pledges, ranking and enforcement.

When a Turkish company cannot pay all of its debts, foreign creditors often ask whether a secured creditor will be paid first.

In many cases, a creditor holding a valid mortgage, pledge or other enforceable security right receives priority from the secured asset. A foreign creditor without security may rank as an ordinary unsecured creditor, but it may still pursue other assets, surplus proceeds, guarantees, fraudulent transfers and ranking objections.

Nationality alone does not determine priority. The decisive factors are the type of claim, security rights, registration, attachment date, statutory preferences and the applicable enforcement or insolvency procedure.

This 2026 updated guide explains how priority is determined between foreign creditors and secured creditors in Turkey.

Does a Secured Creditor Always Get Paid First?

A secured creditor generally has priority over the collateral securing the debt, up to the amount covered by the security.

For example, a mortgage may give priority over the proceeds from the sale of the mortgaged real estate. A pledge may provide priority over the pledged shares, inventory or other movable property.

However, priority is not unlimited. Earlier security rights, enforcement expenses, statutory preferences and the value of the collateral may affect the final distribution.

Does a Foreign Creditor Have Lower Priority?

No. A foreign creditor is not automatically subordinated because it is based outside Turkey.

If the foreign creditor holds a valid mortgage, pledge, guarantee or other security interest, its position depends on that right. If it has only an unpaid invoice or unsecured commercial claim, it may compete with other ordinary creditors according to the applicable ranking rules.

The creditor should prove the claim and submit it through the correct enforcement or insolvency procedure.

What Is the Difference Between Secured and Unsecured Claims?

A secured claim is supported by a legally enforceable asset or security right, such as a mortgage over real estate or a pledge over shares, inventory or other property.

An unsecured claim is based on a contract, invoice, loan, service agreement or damages claim without a specific asset securing payment.

An unsecured foreign creditor may still obtain an attachment or judgment, but it may rank behind secured creditors concerning the secured asset.

Which Security Rights Are Common in Turkey?

Common security rights may include mortgages over real estate, pledges over movable assets or shares and security arrangements concerning receivables.

A personal guarantee is different from a mortgage or pledge. It may provide a separate claim against the guarantor but does not necessarily create priority over a specific company asset.

The creditor should verify whether the security was properly created, registered, maintained and connected to the debt.

Why Is Registration Important?

A security right may lose priority if it was not properly registered or perfected under the applicable rules.

The creditor should examine the registration date, secured amount, asset description, ranking, amendments and any cancellation or expiry.

For real estate, land-record information and existing mortgages are particularly important. For shares or movable assets, the relevant registration and ownership records should also be reviewed.

How Does the Value of the Asset Affect Payment?

A secured creditor may not recover the entire debt if the collateral is worth less than the secured amount or if earlier rights rank ahead.

After the higher-ranking claim and enforcement expenses are paid, any remaining proceeds may be available to lower-ranking secured or unsecured creditors.

The foreign creditor should obtain an independent valuation and review existing encumbrances before assuming that the property will produce sufficient recovery.

What Happens to the Surplus After a Secured Creditor Is Paid?

If the collateral is sold for more than the secured debt and higher-ranking expenses, the remaining proceeds may be distributed to other creditors according to the applicable ranking.

An unsecured foreign creditor may therefore have an interest in monitoring the sale price, valuation and distribution schedule.

If the asset was sold below market value, the creditor may investigate whether the sale was improper or designed to reduce recoveries.

How Is Priority Determined Between Several Secured Creditors?

Priority may depend on the type of security, registration date, ranking agreement, statutory rules and the asset involved.

A later creditor may rank behind an earlier mortgage or pledge. The exact outcome can change if the earlier security was released, reduced, invalid or improperly registered.

The foreign creditor should obtain the complete registration history and not rely only on the debtor’s explanation.

Can an Ordinary Foreign Creditor Attach Company Assets?

Yes. An unsecured foreign creditor may pursue bank accounts, real estate, vehicles, shares, inventory and receivables owed to the company.

A provisional attachment may also be requested where there is a due monetary claim and a risk that collection will become difficult.

The attachment may not defeat an existing mortgage or pledge, but it can protect any surplus value or other assets not subject to higher-ranking rights.

Can Provisional Attachment Create Priority?

A provisional attachment may protect the creditor’s position, but it does not automatically rank ahead of registered security rights or statutory preferences.

The creditor may need to continue with enforcement or litigation and comply with the required procedural steps.

The date and implementation of the attachment should be documented because they may affect distribution among ordinary creditors.

What Is a Ranking Schedule?

When the available proceeds are insufficient, the enforcement authority may prepare a ranking schedule showing which creditors will be paid and in what order.

The schedule may include secured claims, ordinary claims, enforcement expenses, public claims, employee-related preferences and interest calculations.

A foreign creditor should review the schedule immediately and object if its claim, security, amount or priority is incorrect.

Can a Foreign Creditor Challenge the Secured Creditor’s Priority?

A challenge may be possible if the security was never validly created, was not properly registered, exceeded the secured debt or was created through fraud.

The creditor may also investigate whether a mortgage or pledge was registered shortly before enforcement to defeat other creditors.

The objection must identify the specific legal and factual error and must be filed within the applicable period.

What If the Company Transferred Assets Before Enforcement?

If the Turkish company transferred assets to shareholders, directors or related companies, the foreign creditor may investigate whether the transaction was fraudulent or designed to defeat creditors.

A cancellation of disposition or fraudulent-transfer action may be considered if the legal requirements are satisfied.

A secured creditor’s existence does not prevent an unsecured creditor from pursuing other assets or challenging improper transactions.

What Happens During Bankruptcy or Restructuring?

Bankruptcy or restructuring may create a collective distribution process. Secured creditors may retain priority over collateral, while unsecured foreign creditors may need to register their claims and participate in the distribution.

The creditor should assess security, priority, claim registration, asset values and possible challenges to transfers.

A prior enforcement proceeding does not always guarantee full recovery once a collective insolvency process begins.

What Evidence Should a Foreign Creditor Preserve?

The creditor should preserve the contract, invoices, delivery records, payment demands, account statements, guarantees and enforcement documents.

Evidence concerning the competing secured claim may include mortgage records, pledge documents, registration information, valuation reports and distribution schedules.

In 2026, electronic enforcement files, digital bank records, electronic invoices, corporate emails and cloud accounting data may help prove the claim and identify asset transfers.

Can Directors or Shareholders Be Personally Liable?

Directors and shareholders are not automatically liable for company debts.

Personal liability may arise from a personal guarantee, fraud, misuse of assets, unlawful transfers or independent misconduct.

A foreign creditor should distinguish between priority against company assets and a separate personal claim against individuals.

Can a Foreign Creditor Act from Abroad?

A foreign creditor does not always need to travel to Turkey. A Turkish lawyer may review the enforcement file, submit the claim, challenge the ranking schedule and pursue attachment or litigation under a valid power of attorney.

Depending on the issuing country, legalization, apostille and official translation may be required.

Lawyer Fırat Fesih Kaya assists foreign creditors with secured-creditor disputes, ranking schedules, provisional attachment and commercial debt recovery in Turkey.

2026 Legal Considerations

Foreign creditors should determine whether they are secured or unsecured before choosing a recovery strategy. They should also examine the asset, existing encumbrances, registration dates, claim amount and insolvency status.

A practical strategy may combine enforcement, provisional attachment, asset valuation, ranking objections and challenges against fraudulent transfers.

The applicable rules on mortgages, pledges, enforcement, bankruptcy, creditor priority and objection periods should be reviewed before action is taken.

Frequently Asked Questions (FAQ)

1. Does a secured creditor generally get paid before a foreign unsecured creditor?

Usually, a valid secured creditor has priority from the collateral, subject to earlier rights, expenses and statutory preferences.

2. Is a foreign creditor automatically lower in priority?

No. Nationality does not determine priority. The type and validity of the creditor’s security and claim are decisive.

3. What if the foreign creditor has a mortgage or pledge?

The foreign creditor’s priority will depend on the validity, registration, ranking and scope of that security.

4. Is a personal guarantee the same as a mortgage?

No. A personal guarantee may create liability against the guarantor but does not necessarily secure a specific asset.

5. Can an unsecured foreign creditor attach company assets?

Yes. The creditor may pursue assets and receivables, although existing security rights may rank ahead.

6. Can the creditor challenge an incorrect ranking schedule?

Yes. The creditor may object to an omitted claim, wrong amount, incorrect security or improper priority.

7. Can provisional attachment defeat a mortgage?

Generally, provisional attachment does not automatically defeat an earlier valid mortgage or pledge.

8. What happens if the collateral is worth less than the secured debt?

The secured creditor may not be fully paid, and little or no value may remain for lower-ranking creditors.

9. Can fraudulent asset transfers be challenged?

A foreign creditor may consider a cancellation of disposition or fraudulent-transfer action if the legal requirements are satisfied.

10. Can a foreign creditor participate without traveling to Turkey?

In many cases, yes. A Turkish lawyer may act under a valid power of attorney.

This article is provided for general informational purposes only and does not constitute legal advice. We recommend consulting a lawyer about your specific circumstances to avoid any loss of rights.

Expert Legal Support for Foreign Creditors

Priority disputes require a careful review of security rights, registration dates, asset values, enforcement records and distribution schedules.

Fırat Fesih Kaya Law Office provides professional legal support to foreign creditors in secured-creditor disputes, ranking objections, provisional attachment, enforcement proceedings and commercial debt recovery.

Call: +90 312 434 22 22
WhatsApp: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yildirim Tower, Balgat, Cankaya, Ankara, Turkey