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Q.What is a Priority Claim?
A.A priority claim is an unsecured debt in a bankruptcy case that take priority over all other debts. In other words they are debts that must be paid first and in some cases are not dischargeable (the debtor must still pay the debt in full).
Section 507(a) of the Bankruptcy Code sets forth the priority in which the following "priority debts" are paid:
- Administrative expenses, costs and fees of the bankruptcy;
- Unsecured claims that arise after the bankruptcy petition has been filed in an involuntary case;
- Employee and independent contractor wage claims up to $4300 per claim;
- certain contributions to employee benefit plans which arise from services provided within 180 days of the bankruptcy filing up to $4300 per employee;
- unsecured claims of farmers and fishermen against debtors operating storage or processing facilities up to $4,300 per claim;
- Layaway claims of individuals who didn't get the item they made the deposit on, up to $1,800;
- Court ordered child and spousal support;
- Recent income, gross receipt, sales, excise, property, and employment taxes and custom's duties; and then
- Commitments to maintain the capital of a bank or savings and loan
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