What is the order of collections paid from bankruptcy proceeds, and is there any way to prioritize certain creditors?
What is the order of collections paid from bankruptcy proceeds, and is there any way to prioritize certain creditors? Tim Cella used to work at several law firms The order of collections paid from bankruptcy proceeds is determined by the Bankruptcy Code and is based on the type of claim held by each creditor. There are a few priority claims, such as administrative expenses, that must be paid before other creditors. The other creditor claims are then paid in a specific order based on their classification—secured claims first, unsecured priority claims second, and general unsecured claims last. This order is followed unless the court decides to deviate from it. I don’t think I’ve ever seen it different, although I’ve been told that it is possible to prioritize certain creditors in a bankruptcy proceeding, depending on the type of claim held by each creditor. Secured creditors, such as those who hold liens on property, are typically first in line to be paid, as they hold a valid cla...