Dear Debtor, You Said I Was Your First Priority, A VIP!

In my May 26th post, I raised several questions that unsecured creditors in any Chapter 11 case should know the answers to and take action where appropriate. One of those questions is "Am I entitled to priority payment?" This is also important to answer in a Chapter 7 case.

Your delinquent customer told you not to worry, you were first in line for payment, and that payment would be coming soon. Next thing you know, your customer has filed a bankruptcy and you have not been paid. As discussed in my June 24th post, you obtain a proof of claim form and are prepared to fill it out and file it before the deadline, but then you get to the last question, number 12 – "Is all or part of the claim entitled to priority under 11 U.S.C. § 507(a)?"

Your first impulse is to check "yes" – of course you are entitled to priority – the debtor told you that you were first place, a VIP for payment.

NOT so fast...most creditors' claims are "general" unsecured claims, and not entitled to priority treatment. Take a breath and ask yourself, does my claim fit into any of the following categories:

domestic & child support obligation; salary, wages, or benefits owed to an employee; deposit of less than $2,850.00 towards the purchase, lease, or rental of property or services for personal, family, or household use; claim for contribution to an employee benefit plan; claim of grain farmer or...