Pro Rata

Definition - What does Pro Rata mean?

In general, pro rata is a percent of a whole. It is often used in bankruptcy when a debtor does not have enough money to satisfy their debts. Creditors are requested to accept a portion of the total amount as full and final payment. Insurance policies will also put clauses in to limit their liability in cases where multiple insurance policies might have coverage over an incident and an insurance company that takes a pro rata stance will only be liable to pay the difference between the amount other insurers pay and the limit allowed by law.

Justipedia explains Pro Rata

Within a bankruptcy, the creditors do not automatically have to agree to take a pro rata portion of the debt. If they refuse, the Trustee will have to try to pay them the entire amount. However, limiting factors may prevent that from occurring. The pro rata amount varies on the amount available to the debtor for repayment as well as the amount of the debt and whether the creditor has a priority claim.

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