What Is a Priority Claim in Bankruptcy?

Updated March 12, 2019

Many people think that when someone files for bankruptcy, all of the debtor’s creditors get left out in the cold. That’s not always the case. In virtually all Chapter 13 cases, and some Chapter 7 cases, money is available to pay creditors.

But creditors don’t get paid automatically. Before receiving funds, a creditor must submit a “proof of claim” to the court using an official Proof of Claim form.

And not all creditors’ debts receive the same treatment, either. A priority claim is a debt that is entitled to special treatment and will get paid before nonpriority claims. When filling out the proof of claim form, the creditor will indicate a claim’s priority status by checking “yes” in box 12. (For an overview of the different claims, read Types of Creditor Claims in Bankruptcy: Secured, Unsecured & Priority.)

The bankruptcy trustee—the court-appointed individual responsible for overseeing the case—will review all submitted claims. After the resolution of any objections (and the confirmation of a plan in a Chapter 13 case), the trustee will distribute funds to priority creditors. If money remains, the trustee will pay claims without priority status.

Here are examples of common priority claims:

• costs to administer the bankruptcy (such as accounting or legal fees)
• child and spousal support obligations
• up to $13,650 in compensation earned 180 days before bankruptcy (wages, commissions, and other compensation)
• up to $13,650 in contributions to an employee benefit plan
• up to $3,025 for deposits given to the filer to secure personal products, services or housing in the future
• up to $6,725 to a fisherman for unpaid fish sold to a storage or processing facility
• taxes owed to the government, and
• injury or death claims caused by an intoxication-related motor vehicle or boat accident.

These figures are effective as of April 1, 2019, and should remain valid through March 31, 2022.

All creditors seeking payment in a Chapter 13 case must file a claim. In a Chapter 7 case, the court will instruct creditors to submit claims if it appears that the case is an “asset case,” meaning that money will be available for distribution. By contrast, creditors won’t submit claims in a “no asset case.” For additional information, read Priority Debts in Chapter 7 Bankruptcy.