Section 503 of the Bankruptcy Code grants payment priority to “administrative expenses” with the intent of supporting debtor reorganization by encouraging claimants to do business with the debtor. Among them is a §503(B)(9) claim – an administrative expense claim for the value of any goods received by the debtor within 20 days of bankruptcy; and sold to the debtor in the ordinary course of business.
How does a creditor qualify for a §503(B)(9) claim? Creditor must show it: (a) sold goods – not services – to the debtor; (b) within 20 days of the bankruptcy filing; and (c) within the ordinary course of debtor’s business.
Bankruptcy courts frequently enter procedural orders governing the §503(B)(9) claims process in a case. These orders typically include an earlier deadline (than general bar date) to assert §503(B)(9) claim. Vendors who miss this deadline are forever barred from asserting a §503(B)(9) claim.
Learn more about how you can gain §503(B)(9) priority status in When are Goods ‘Received by the Debtor’ for Purposes of a Section 503(b)(9) Administrative Expense Claim? by Russell C. Silberglied and Christopher M. De Lillo.
Hajar is an associate with Much Shelist in both its Business Transactions Group and its Restructuring & Insolvency Group.