Unsecured Trade Creditors Committee

ABI Committee News

Getting Paid: Climbing the Claim Priority Ladder

In bankruptcy cases, general unsecured claims can be found near the back of the line and are often paid pennies on the dollar. Having a perfected first lien on valuable collateral is certainly preferable to a mere general unsecured creditor, but if a creditor does not have such security, is it always regulated to waiting months for its pro rata share of whatever crumbs are left after paying other claimants? Not necessarily. This article discusses how the law provides certain unsecured claimants with several options for clawing their way up the ladder of claim priority and positioning themselves ahead of their fellow unsecured creditors.

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What's the Big Deal about Hiring a Liquidating Trustee?

If your company is a member of the official committee of unsecured creditors (committee) and the bankruptcy your company is involved with is nearing the time of the confirmation of a liquidation plan, this article may be of interest to you. By now, you have gotten some idea of where the bankruptcy is heading. The debtor may have already sold some of the assets and debtor’s counsel may have identified major issues that need to be negotiated or litigated, and the debtor’s financial adviser has probably developed a comprehensive list of the many claims against the estate. What you, as a representative of a committee member, might not have is a clear understanding of what will happen after the confirmation of the plan, how the process will come to a conclusion and who will direct it.

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Do Hybrid Claims Qualify for § 503(b)(9) Administrative Expense Treatment?

Although a claim involving only goods sold to the debtor qualifies as an administrative expense under § 503(b)(9) [1] of the Bankruptcy Code, courts are split as to whether, and to what extent, this section covers so-called “hybrid” claims—those involving both goods and services transactions. Ultimately, courts must decide whether goods transactions within hybrid claims can be allocated as individual § 503(b)(9) expenses or whether hybrid claims should be considered indivisible for qualification under § 503(b)(9) and analyzed wholesale. Recently, in In re Circuit City Stores Inc., [2] the court took the indivisible view, holding that the statutory language of goods “sold to the debtor in the ordinary course of such debtor’s business” required a determination of whether a claim “predominantly” involves goods sold. [3] The court’s purported adoption of the “predominant-purpose test” signals a split over how to apply § 503(b)(9) to hybrid claims. This article discusses the current split in analyzing hybrid claims under § 503(b)(9) and explains how these different analyses could lead to vastly different outcomes for creditors.

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