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Bankruptcy in Brief
a service of the Moran Law Group
Throughout Bankruptcy in Brief, we refer to "priority claims"
and "priority taxes". Just what are the priorities of
the Bankruptcy Code?
Priority refers to the order in which unsecured
claims in a bankruptcy case are paid from the money available in the
estate. Claims in the higher priority are paid in full before claims
in a lower priority receive anything.
Within a class, creditors share the available funds in proportion to
the size of their claim.
The order of payment, as set out in §
507, is as follows:
- Claims for debts to spouse or children for court ordered support
- Administrative expenses of the bankruptcy
- Unsecured, post petition claims
in an involuntary case
- Wage claims of employees and independent salespersons up to $10,000
- Contributions to employee benefit plans up to $10,000 per employee
- Claims of farmers and fishermen against debtors operating storage
or processing facilities.
- Layaway claims of individuals who didn't get the item they made the
- Recent income, sales, employment or gross receipts taxes
In the case of an individual debtor, some of these kinds of claims are also
non dischargeable in Chapter 7, such as support and taxes.
Secured claims are paid from
the proceeds of the collateral; if the collateral
is insufficient to pay the claim in full, the balance becomes an unsecured