[Direct answer]Priorities. According to Articles 394 and 410 of the Civil Code of the People's Republic of China (effective from January 1, 2021), when the debtor fails to perform the due debt, the creditor has the right to receive priority compensation from the mortgaged property by discounting its value or through auction or sale; in the distribution process, the proceeds from the execution shall be used to repay the mortgaged rights and other priority compensation claims first, and the remaining part shall be distributed proportionally among ordinary creditors. Creditors with a mortgage right on the property sealed up by the court may also apply for participation in the distribution and claim priority compensation directly without the execution basis. They should properly keep the mortgage registration materials and timely assert their claims, which can be referred to for reference.Creditor's rights and debts, and enforcement casesColumn.

1. Problem background and typical scenarios

These types of issues often arise in several situations: First, when a real estate mortgage loan is not repaid and the mortgagee claims priority compensation from the auction proceeds; Second, when a private loan has undergone real estate mortgage registration and competes with other unsecured creditors for repayment priority; Third, when the mortgaged property is first sealed up by the court for disposal, and the mortgagee only learns about it afterwards, fearing that the repayment priority may not be guaranteed; Fourth, when the debtor's property is insufficient to repay all debts, and ordinary creditors question the scope of priority rights; Fifth, when the scope of mortgage guarantee is not clearly defined, and there are disputes over whether the principal, interest, and penalty are all within the priority scope. In the enforcement practice of Beijing courts, the mortgagee's priority compensation is based on registration, and the scope of guarantee is determined by the content of the registration and the effective documents.

II. Key points of contention

First focus: Whether the scope of priority compensation includes interest, liquidated damages, and the costs of realizing the creditor's rights. Second focus: The deduction of mortgage disposal costs, including appraisal and auction fees, shall be deducted before priority claims. Third focus: If the proceeds from the sale of the mortgaged property are insufficient to satisfy priority claims, the deficiency shall be converted into ordinary claims and compensated proportionally. Fourth focus: The order of repayment shall be determined according to the registration date of the mortgage. Fifth focus: Mortgages of real estate that have not undergone mortgage registration do not generate priority compensation rights. Sixth focus: The priority compensation rights of construction project prices and the competing order of mortgage rights. Specifically, the current effective laws and regulations and judicial rulings shall prevail. For disputes involving real estate mortgage registration and ownership, reference can be made to the relevant provisions.Property transactions and construction projectsColumn.

III. Professional analysis by Henglue Lawyers

Based on the experience of lawyers from our firm in handling multiple disputes over the priority of execution distribution, there are three common risks: Firstly, if the mortgage contract has been signed but not registered, the creditor can only be compensated as an ordinary creditor for the auction proceeds and cannot claim priority; Secondly, if the effective document does not confirm the content of priority compensation, the mortgage registration and the scope of guarantee need to be proved separately in the distribution stage, which increases the time and cost of evidence collection; Thirdly, if the mortgaged property is disposed of by the first-seized court, the mortgagee fails to apply for participation in the distribution and claim priority in time, and passively waits for the repayment, which may easily miss some procedural nodes. The safe approach is to submit the application for priority compensation and the proof of mortgage registration to the execution court as soon as possible after discovering that the mortgaged property has been sealed up and disposed of; if the distribution plan does not fully reflect the priority right, timely raise written objections, and if necessary, confirm the scope of priority compensation through litigation of objections to avoid the priority right being passively reduced in the process.

IV. Practical suggestions and legal basis

Action suggestions: First, check the real estate registration certificate and the movable property mortgage registration information to confirm the establishment of the mortgage right and the scope of the guarantee; Second, if the mortgaged property is sealed up, immediately apply to participate in the distribution and claim priority compensation, attaching the registration materials and the basis for enforcement; Third, check whether the amount of priority claims, the deduction of disposal expenses, and the order of repayment in the distribution plan are correct; Fourth, if the priority rights are omitted or reduced, raise objections in writing within the objection period and, if necessary, file a lawsuit against the objection; Fifth, if the proceeds from the sale of the mortgaged property are insufficient to repay the debt, the remaining claims shall continue to participate in the distribution as ordinary claims. Legal basis: Article 394 and Article 410 of the Civil Code of the People's Republic of China (effective January 1, 2021) establish the rules of mortgage rights and priority compensation; Article 109 of the Enterprise Bankruptcy Law of the People's Republic of China (effective June 1, 2007) stipulates that the rights holders who enjoy security rights over the debtor's specific property have the right to priority compensation. For procedural details, please refer to the relevant provisions.Special services and other casesColumn.

5. Henglu Law Firm's Reminder

Risk Warning: First, priority shall be subject to registration, and it will be difficult to obtain support for claiming priority solely based on the mortgage contract; Second, the scope of priority shall be subject to registration and effective documents, and unclear agreements are easily subject to compression; Third, the disposal fees shall be deducted first, and the actual recoverable amount may be lower than the total amount of the mortgage claim; Fourth, in the event of entering bankruptcy proceedings, the secured creditor shall also enjoy priority over specific property, but it is necessary to timely declare the creditor's rights. It is recommended to proceed throughBeijing Henglue Law FirmFor details, please refer to the similar columns on the official website. It is advisable to entrust a lawyer to follow up on the entire process of enforcement and distribution of major mortgage claims.

VI. Frequently Asked Questions

Q1: Are secured claims always ranked first?

This is generally the case with the sale proceeds of the mortgaged property. The execution proceeds are first deducted for execution and disposal expenses, then used to repay priority claims such as the mortgage right, and the remaining portion is distributed proportionally to ordinary creditors. However, statutory priority rights such as the right to priority compensation for construction project payments may compete with the mortgage right for repayment priority. The establishment time and registration status of the mortgage also affect the repayment priority. The specific priority order shall be determined based on the registration and effective documents.

Q2: Can I still receive priority compensation if I haven't completed the mortgage registration?

If the real estate mortgage is not registered and the mortgage right is not established, the lender cannot receive priority compensation from the auction proceeds and can only participate in the distribution as an ordinary creditor. For movable property mortgages, the mortgage right is established upon the effective date of the contract, but it cannot be invoked against bona fide third parties without registration. For those who have signed a mortgage contract, they can claim that the other party should bear corresponding responsibilities or require them to complete the registration formalities. However, it is difficult to rectify the priority status during the enforcement distribution stage. It is recommended to complete the registration formalities immediately when the loan is made.

Q3: How can a mortgagee assert priority during enforcement?

After discovering that the mortgaged property has been sealed up and auctioned, the creditor shall submit an application for participation in the distribution or priority compensation to the executing court, attaching the certificate of mortgage registration, the effective legal documents, and the detailed calculation of the creditor's claims; if the executing court has not yet obtained the enforcement basis, the creditor who enjoys a security right on the sealed-up property may directly apply for participation in the distribution to claim priority compensation. If the distribution plan does not reflect the priority right, the creditor may file a written objection within the objection period and, if necessary, initiate an objection lawsuit.

Q4: What should I do if the proceeds from the sale of the collateral are not enough to repay the debt?

The insufficient portion shall be converted into ordinary claims, and the creditor shall participate in the distribution of the remaining property in proportion to other creditors. The creditor shall assert rights to all claims: the priority portion shall be limited to the registered scope of the guarantee, and the unpaid portion shall continue to be declared; at the same time, the creditor shall investigate the debtor's other property to apply for enforcement. Before accepting the distribution plan, the creditor shall check the calculation sequence of deducting fees first, then clearing the priority, and finally converting the insufficient portion into ordinary claims and distributing it in proportion to other creditors to avoid omissions.

Q5: What are the legal basis for mortgage priority repayment?

Article 394 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates the establishment of the mortgage right and the right to priority repayment, and Article 410 stipulates the methods of discount, auction, and sale for the realization of the mortgage right; Article 109 of the Enterprise Bankruptcy Law of the People's Republic of China (effective June 1, 2007) confirms the priority repayment status of the secured creditor to specific property. For operations involving enforcement procedures, you can refer to the relevant provisions.Creditor's rights and debts, and enforcement casesColumn.

The above answer is based on the judicial practice in Beijing. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →\nLegal services for creditor-debtor disputes·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.