NCS Blog

What is Section 503(b)(9)

What is on Earth is Section 503(b)(9)?


Business bankruptcy filings have fluctuated this year, but in general, are down compared to last year. However, the decrease in bankruptcy filings is not a pass for creditors to skip out on secured transactions.
 
If your customer files for bankruptcy protection, it’s important for you, as a creditor, to be familiar with 503(b)(9) claims.
 
In The Chapter 11 Vendor Game Changer: Section 503(b)(9) Claims, authors David Conaway & David Grogan provide creditors with an overview of the importance of these claims.
 
First, what on earth is Section 503(b)(9)?
It is the section of the bankruptcy code that allows “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business” to be considered administrative -- giving them priority and increasing the likelihood of payment.
 
Grogan explains the effect of this section is to increase “the distribution that manufacturers, suppliers and distributors can expect on those goods that they delivered to the debtor within the last 20 days before the bankruptcy filing.” It's important to note that these are goods that have been sold to their customer during the ordinary course of business.
 
Next, when are goods received by the debtor?
The key appears to be the word within: “Section 503(b)(9) extends priority to goods received by the debtor within 20 days before the bankruptcy filing.” However, the bankruptcy code does not define “receipt.”
 
“The Bankruptcy Code does not define this term, and the courts look to other law, again being the Uniform Commercial Code, and other portions of the Bankruptcy Code for guidance concerning shipments within the United States” says Grogan.
 
And, how does one file a 503(b)(9) claim?
Grogan explains, “Initially, creditors would generally file an application for allowance of the claim…Normally, a creditor can assert its Section 503(b)(9) claim in the form Proof of Claim…a creditor should be vigilant regarding a Section 503(b)(9) procedures order, as it will set a bar date for filing the claim.”
 
Of course, you can contact NCS and we’d happily assist with filing your proof of claim!
 
For additional information on proof of claims, check out 3-in-3 Bankruptcy Proof of Claim and Credit Survival Guide: Proof of Claim.
 

NCS Blog

Sunshine, summertime and Florida construction liens and bond claims! I’m not sure it’s quite the state-slogan Florida wants, but let’s roll with it.

Florida construction liens and bond claims were the hot topic on the NCS Blog this week. This post discusses the steps necessary for securing mechanic’s lien & bond claim rights, check it out!
 

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