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Priority Claim

Definition - What does Priority Claim mean?

A priority claim in a bankruptcy action is a debt that is prioritized as most important to be paid above all other debts. The sum total of debts in a bankruptcy is considered in connection with the effect it has on other people and situations and the debts are ranked according to their exposure to this extra circumstance. There are many different debts that can be considered priority claims including child support, alimony, contributions to pensions or employee benefit plans, and outstanding tax debts.

Justipedia explains Priority Claim

If the bankrupt individual owns a business and owes wages to employees, then that payment will be prioritized if possible. There can only be one absolute priority claim, but there can be a few claims that must be prioritized between them. In many instances where there are more than one debts that should be considered a priority but there is not enough cash in the bankruptcy estate to pay for all of them, a split between the prioritized debtors is enacted. Each creditor behind the debt that should be prioritized is required to file a priority claim to be considered.

This definition was written in the context of Bankruptcy

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