Priority refers to the order in which unsecured claims in a bankruptcy case are paid from the money available in the bankruptcy estate. The Bankruptcy Code establishes the order in which claims are to be paid from the bankruptcy estate. All claims of a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority are paid pro rata, meaning creditors share the available funds in proportion to the size of their claim.
The order of payment, as set out in 11 USC § 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;
- Wages, salaries, or commissions claims of employees and independent salespersons up to $10,950 per claim;
- Contributions to employee benefit plans up to $10,950 per employee;
- Claims of farmers and fishermen against debtors operating storage or processing facilities;
- Claims of individuals, to the extent of $ 2,425 arising from the deposit of money in connection with purchase, lease, or rental of property, and where the property was not delivered;
- Recent income tax, property tax, sales tax, employment tax, excise tax and customs duty if due from the debtor;
- Claims based upon any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution; and
- Claims arising for death or personal injury resulting from operation of a motor vehicle or vessel by debtor while intoxicated from using alcohol, a drug, or another substance.