More ‘Goods’ News for the Trade

In Chapter 11 bankruptcy cases, a trade creditor’s unsecured claim for goods orservices provided to a debtor post-petition is far more likely to be paid in full than an unsecured claim for goods or services provided pre-petition. This is because post-petition claims are generally entitled to administrative expense priority status, while pre-petition trade claims are generally treated as low priority, general
unsecured claims.

The Bankruptcy Code requires the full payment of administrative expense claims in order for the debtor to confirm a Chapter 11 plan. This gives post-petition administrative expense claims a significant advantage over pre-petition general unsecured claims, which in many cases are paid only pennies on the dollar, if anything at all.