Electricity: It’s Electric! It’s Shocking! But Is It a Good?

Creditors seeking to maximize their recoveries in bankruptcy cases have found a friend in section 503(b)(9) of the Bankruptcy Code. Section 503(b)(9) elevates the value of goods sold to and received by a debtor within 20 days of the debtor’s bankruptcy filing from a general unsecured claim to an administrative expense priority claim.

Section 503(b)(9) priority claims are valuable to creditors because priority claims must be paid prior to the payment of lower priority unsecured claims, and the Bankruptcy Code requires full payment of all administrative expense priority claims (including section 503(b)(9) claims) as a condition for approval of a Chapter 11 plan.