Cardozo Law Review
Abstract
Although attorneys are specifically granted an administrative expense priority pursuant to section 507(a)(1) of the Bankruptcy Code ("Code"), other creditors might have even higher priorities. Three such examples come to mind. First, if a secured creditor has been promised adequate protection of its collateral which subsequently fails, the secured party is given a higher priority under section 507(b). Second, a debtor-in-possession ("DIP") under the authority of section 364(c)(1) may grant to a postpetition lender a higher priority than the one provided in section 507(a)(1). Third, if a Chapter 11 case is converted to Chapter 7 the fate of 90 percent of all Chapter 11 cases - the Chapter 7 trustee will have a higher priority for any "burial expense" than that of the administrative claimant from Chapter 11. These higher priorities, together with the risk that assets may simply dissipate, means that extending credit to a DIP, even on an administrative priority basis, is risky. Therefore, lawyers and other professionals want current payment in lieu of distributions at the end of the case.
Keywords
Bankruptcy Law, Bankruptcy, Creditors, Credit
Disciplines
Bankruptcy Law | Law
Recommended Citation
Criag B. Cooper,
The Priority of Postpetition Retainers, Carve-Outs, and Interim Compensation Under the Bankruptcy Code,
15
Cardozo L. Rev.
2337
(1994).
Available at:
https://larc.cardozo.yu.edu/clr/vol15/iss6/23