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- Section 507 creates an ordered list
- Each category has its own gate
- Administrative expense allowance comes first
- Priority determines payment order in Chapter 7
- Chapter 13 uses priority in plan treatment
- Chapter 11 confirmation has its own priority protections
- Priority and dischargeability answer different questions
- Classification requires the exact claim facts
- Sources
Key Facts
- Federal level: 11 U.S.C. § 507 ranks specified unsecured claims for priority treatment; it does not make every government, employee, or personal claim a priority.
- Federal level: Priority is category-specific and often depends on definitions, timing rules, dollar caps, and other limits within the statute.
- Federal level: Priority affects distribution order, while dischargeability is a separate question governed by other Bankruptcy Code provisions.
- Federal level: Chapter 13 plans generally must provide full payment in deferred cash payments for claims entitled to priority under § 507 unless the holder agrees to different treatment, subject to statutory exceptions.
- Federal level: Administrative expenses allowed under § 503(b) generally receive priority through § 507(a)(2), but allowance and priority remain distinct steps.
11 U.S.C. § 507 is the Bankruptcy Code’s principal ranking provision for priority claims. It identifies particular unsecured claims that Congress placed ahead of ordinary general unsecured claims. The section matters when an estate or repayment plan does not have enough value to pay every claim in full.
Priority is not the same as secured status. A secured claim relies on an interest in collateral. A priority claim receives a statutory place in the payment order even though it may be unsecured. A claim can also be partly priority and partly nonpriority when a cap or time limit applies.
Section 507 creates an ordered list
Subsection 507(a) assigns priority categories in sequence. The current list includes:
- specified domestic support obligations
- administrative expenses allowed under § 503(b) and specified fees and expenses
- certain unsecured claims arising in the gap period of an involuntary case
- qualifying employee wage, salary, or commission claims within statutory limits
- qualifying employee benefit plan contributions within statutory limits
- specified claims of grain producers and fishermen
- qualifying consumer deposits for undelivered goods or services
- specified governmental tax claims
- certain commitments to maintain capital of an insured depository institution
- specified claims for death or personal injury resulting from unlawful operation of a motor vehicle or vessel while intoxicated
The order is legally significant. A lower-numbered subsection does not necessarily mean every claim in that category will be paid in full, but the category’s placement controls relative priority under the applicable distribution or plan rules.
Each category has its own gate
A claim does not qualify merely because its general subject appears in the list. Wage priority, for example, is limited by when the compensation was earned and by a statutory cap per individual. Consumer-deposit priority is also capped and applies to deposits for personal, family, or household goods or services that were not delivered or provided.
Tax priority depends on the type of tax, relevant return and assessment dates, and other statutory conditions. Domestic support priority includes internal ordering rules and coordination with governmental claims. The controlling subsection must therefore be read as a whole rather than reduced to a label such as “tax debt” or “employee claim.”
Dollar limits in § 507 are adjusted periodically under 11 U.S.C. § 104. A historical opinion or old form can display a superseded cap even when its description of the category remains useful.
Administrative expense allowance comes first
Section 503(b) identifies categories of administrative expenses that may be allowed after notice and a hearing. These can include actual and necessary costs of preserving the estate and other expenses specifically described by the statute.
Section 507(a)(2) then grants priority to administrative expenses allowed under § 503(b), along with specified fees and expenses. A request therefore is not entitled to administrative priority merely because it is called an administrative expense. The expense must satisfy the applicable allowance rule.
Priority determines payment order in Chapter 7
In a Chapter 7 case, 11 U.S.C. § 726 supplies the distribution sequence for property of the estate. Allowed claims entitled to priority under § 507 generally enter the first distribution tier in the order specified by § 507, subject to § 726’s text.
General unsecured claims ordinarily come later. If funds are insufficient within a priority category, the Bankruptcy Code can require pro rata sharing among claims of that kind. The practical result depends on allowed claims, available estate property, exemptions, secured interests, administrative costs, and the controlling chapter.
Chapter 13 uses priority in plan treatment
Chapter 13 does not use the Chapter 7 liquidation sequence in the same way. Section 1322(a)(2) generally requires a plan to provide for full payment, in deferred cash payments, of claims entitled to priority under § 507 unless the claim holder agrees to different treatment. The statute contains a specific exception for certain domestic support claims assigned to or owed directly to a governmental unit when the plan commits all projected disposable income for the applicable period.
This rule is one reason a priority classification can change plan feasibility and payment allocation. It does not mean every debt described informally as important receives priority; the claim still must fit § 507.
Chapter 11 confirmation has its own priority protections
Chapter 11 applies priority through confirmation provisions, including 11 U.S.C. § 1129. Treatment varies by category. The statute addresses administrative expenses, specified priority tax claims, and other priority claims through separate confirmation requirements.
Section 507 supplies the classification foundation, while § 1129 determines required treatment for confirmation. Reading only one section can miss the interaction between priority status and plan payment terms.
Priority and dischargeability answer different questions
Priority asks where a claim stands in payment order. Dischargeability asks whether personal liability survives a discharge. Some claims, particularly certain taxes and domestic support obligations, can be both priority and nondischargeable, but that overlap comes from separate statutory provisions.
Other priority claims may not receive identical discharge treatment. Conversely, a claim can be nondischargeable without receiving priority. The § 507 analysis should therefore remain separate from the discharge exceptions in § 523 and the chapter-specific discharge provisions.
Classification requires the exact claim facts
The claim amount, legal basis, relevant dates, claimant identity, and underlying transaction can determine whether priority applies. A proof of claim may identify a priority basis, but the label is not conclusive if the statutory elements are absent.
The most reliable reading method is to identify the asserted subsection, test every element and limit, and then examine the distribution or plan provision for the chapter. That approach preserves the difference between secured, priority unsecured, general unsecured, and nondischargeable claims.
A broader overview of the federal bankruptcy-law framework can help place § 507 within the Code’s rules for claims, estate administration, plans, and discharge.
Sources
- 11 U.S.C. § 507 priority claims
- 11 U.S.C. § 104 adjustment of dollar amounts
- 11 U.S.C. § 503 administrative expenses
- 11 U.S.C. § 726 Chapter 7 distribution
- 11 U.S.C. § 1322 Chapter 13 plan contents
- 11 U.S.C. § 1129 Chapter 11 confirmation
- 11 U.S.C. § 523 discharge exceptions
- U.S. Courts overview of the bankruptcy process
