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Section 503(B)(9) Four Years Later

By Adam L. Rosen and Anthony Michael Sabino
July 28, 2009

In 2005, Congress added Code ' 503(b)(9) and created a new administrative claim which, in effect, creates a class of “critical” pre-petition creditors that debtors can pay without court authority. The creditors in this entitled class did nothing more than deliver goods to the debtor within 20 days prior to the petition date. Interestingly, the section provides no similar relief to providers of services or any class of lender.

Section 503(b)(9) provides:

After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including '

                              * * *

(9) 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.

If you see the relationship to reclamation rights, you are on the right track. Apparently, ' 503(b)(9) was intended to provide additional, and certainly more reliable, protections to creditors with reclamation rights under Code ' 546(c). In fact, the legislative history of ' 503(b)(9) makes clear that the provision was intended to provide relief to sellers of goods who failed to provide the required reclamation notice under
' 546(c). BAPCPA of 2005, Pub. L. No. 109-8 (2005) at ' 1227.

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