503(b)(9) Claims – Not Merely A Bargaining Chip

Law360, New York (December 29, 2008, 12:00 AM EST) -- With the enactment of section 503(b)(9) of the Bankruptcy Code in 2005, Congress effectively converted large sums of pre-petition trade debt into administrative expense claims.

In essence, section 503(b)(9) grants an administrative claim for the value of goods received by a debtor within 20 days of its bankruptcy filing. These 503(b)(9) claims — like all other administrative claims — must be paid in full before a Chapter 11 debtor can exit from bankruptcy.

Two fundamental consequences have flowed from the congressional decision to greatly expand the...
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