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11 U.S.C. § 726 — Distribution of property of the estate

Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 726 — Distribution of property of the estate

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Stable record: federal_law:legal_authorities:record_usc_5ec3295ca04aa3c2dd1f732b
Source file: Laws/federal/codes/united-states-code/title-11/section-726-distribution-of-property-of-the-estate--d8933c242b.md
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Source location: Title 11, Chapter 7, § 726; chapter-007-liquidation.md

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**(a)** Except as provided in [section 510 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section510&num=0&edition=prelim), property of the estate shall be distributed— (1) first, in payment of claims of the kind specified in, and in the order specified in, [section 507 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section507&num=0&edition=prelim), proof of which is timely filed under [section 501 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section501&num=0&edition=prelim) or tardily filed on or before the earlier of— (A) the date that is 10 days after the mailing to creditors of the summary of the trustee’s final report; or (B) the date on which the trustee commences final distribution under this section; (2) second, in payment of any allowed unsecured claim, other than a claim of a kind specified in paragraph (1), (3), or (4) of this subsection, proof of which is— (A) timely filed under [section 501(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section501/a&num=0&edition=prelim); (B) timely filed under section 501(b) or 501(c) of this title; or (C) tardily filed under [section 501(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section501/a&num=0&edition=prelim), if— (i) the creditor that holds such claim did not have notice or actual knowledge of the case in time for timely filing of a proof of such claim under [section 501(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section501/a&num=0&edition=prelim); and (ii) proof of such claim is filed in time to permit payment of such claim; (3) third, in payment of any allowed unsecured claim proof of which is tardily filed under [section 501(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section501/a&num=0&edition=prelim), other than a claim of the kind specified in paragraph (2)(C) of this subsection; (4) fourth, in payment of any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim; (5) fifth, in payment of interest at the legal rate from the date of the filing of the petition, on any claim paid under paragraph (1), (2), (3), or (4) of this subsection; and (6) sixth, to the debtor. **(b)** Payment on claims of a kind specified in paragraph (1), (2), (3), (4), (5), (6), (7), (8), (9), or (10) of [section 507(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section507/a&num=0&edition=prelim), or in paragraph (2), (3), (4), or (5) of subsection (a) of this section, shall be made pro rata among claims of the kind specified in each such particular paragraph, except that in a case that has been converted to this chapter under section 1112, 1208, or 1307 of this title, a claim allowed under [section 503(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section503/b&num=0&edition=prelim) incurred under this chapter after such conversion has priority over a claim allowed under [section 503(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section503/b&num=0&edition=prelim) incurred under any other chapter of this title or under this chapter before such conversion and over any expenses of a custodian superseded under [section 543 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section543&num=0&edition=prelim). **(c)** Notwithstanding subsections (a) and (b) of this section, if there is property of the kind specified in [section 541(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section541/a/2&num=0&edition=prelim), or proceeds of such property, in the estate, such property or proceeds shall be segregated from other property of the estate, and such property or proceeds and other property of the estate shall be distributed as follows: (1) Claims allowed under [section 503 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section503&num=0&edition=prelim) shall be paid either from property of the kind specified in [section 541(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section541/a/2&num=0&edition=prelim), or from other property of the estate, as the interest of justice requires. (2) Allowed claims, other than claims allowed under [section 503 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section503&num=0&edition=prelim), shall be paid in the order specified in subsection (a) of this section, and, with respect to claims of a kind specified in a particular paragraph of [section 507 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section507&num=0&edition=prelim) or subsection (a) of this section, in the following order and manner: (A) First, community claims against the debtor or the debtor’s spouse shall be paid from property of the kind specified in [section 541(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section541/a/2&num=0&edition=prelim), except to the extent that such property is solely liable for debts of the debtor. (B) Second, to the extent that community claims against the debtor are not paid under subparagraph (A) of this paragraph, such community claims shall be paid from property of the kind specified in [section 541(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section541/a/2&num=0&edition=prelim) that is solely liable for debts of the debtor. (C) Third, to the extent that all claims against the debtor including community claims against the debtor are not paid under subparagraph (A) or (B) of this paragraph such claims shall be paid from property of the estate other than property of the kind specified in [section 541(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section541/a/2&num=0&edition=prelim). (D) Fourth, to the extent that community claims against the debtor or the debtor’s spouse are not paid under subparagraph (A), (B), or (C) of this paragraph, such claims shall be paid from all remaining property of the estate.

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 501 — Filing of proofs of claims or interests

**(a)** A creditor or an indenture trustee may file a proof of claim. An equity security holder may file a proof of interest. **(b)** If a creditor does not timely file a proof of such creditor’s claim, an entity that is liable to such creditor with the debtor, or that has secured such creditor, may file a proof of such claim. **(c)** If a creditor does not timely file a proof of such creditor’s claim, the debtor or the trustee may file a proof of such claim. **(d)** A claim of a kind specified in section 502(e)(2), 502(f), 502(g), 502(h) or 502(i) of this title may be filed under subsection (a), (b), or (c) of this section the same as if such claim were a claim against the debtor and had arisen before the date of the filing of the petition. **(e)** A claim arising from the liability of a debtor for fuel use tax assessed consistent with the requirements of [section 31705 of title 49](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section31705&num=0&edition=prelim) may be filed by the base jurisdiction designated pursuant to the International Fuel Tax Agreement (as defined in [section 31701 of title 49](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title49-section31701&num=0&edition=prelim)) and, if so filed, shall be allowed as a single claim.

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 510 — Subordination

**(a)** A subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law. **(b)** For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock. **(c)** Notwithstanding subsections (a) and (b) of this section, after notice and a hearing, the court may— (1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest; or (2) order that any lien securing such a subordinated claim be transferred to the estate.

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Federal law — U.S. Code and appendices · legal_authorities

28 U.S.C. § 581 — United States trustees

**(a)** The Attorney General shall appoint one United States trustee for each of the following regions composed of Federal judicial districts (without regard to section 451): (1) The judicial districts established for the States of Maine, Massachusetts, New Hampshire, and Rhode Island. (2) The judicial districts established for the States of Connecticut, New York, and Vermont. (3) The judicial districts established for the States of Delaware, New Jersey, and Pennsylvania. (4) The judicial districts established for the States of Maryland, North Carolina, South Carolina, Virginia, and West Virginia and for the District of Columbia. (5) The judicial districts established for the States of Louisiana and Mississippi. (6) The Northern District of Texas and the Eastern District of Texas. (7) The Southern District of Texas and the Western District of Texas. (8) The judicial districts established for the States of Kentucky and Tennessee. (9) The judicial districts established for the States of Michigan and Ohio. (10) The Central District of Illinois and the Southern District of Illinois; and the judicial districts established for the State of Indiana. (11) The Northern District of Illinois; and the judicial districts established for the State of Wisconsin. (12) The judicial districts established for the States of Minnesota, Iowa, North Dakota, and South Dakota. (13) The judicial districts established for the States of Arkansas, Nebraska, and Missouri. (14) The District of Arizona. (15) The Southern District of California; and the judicial districts established for the State of Hawaii, and for Guam and the Commonwealth of the Northern Mariana Islands. (16) The Central District of California. (17) The Eastern District of California and the Northern District of Cal

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 725 — Disposition of certain property

After the commencement of a case under this chapter, but before final distribution of property of the estate under [section 726 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section726&num=0&edition=prelim), the trustee, after notice and a hearing, shall dispose of any property in which an entity other than the estate has an interest, such as a lien, and that has not been disposed of under another section of this title.

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 543 — Turnover of property by a custodian

**(a)** A custodian with knowledge of the commencement of a case under this title concerning the debtor may not make any disbursement from, or take any action in the administration of, property of the debtor, proceeds, product, offspring, rents, or profits of such property, or property of the estate, in the possession, custody, or control of such custodian, except such action as is necessary to preserve such property. **(b)** A custodian shall— (1) deliver to the trustee any property of the debtor held by or transferred to such custodian, or proceeds, product, offspring, rents, or profits of such property, that is in such custodian’s possession, custody, or control on the date that such custodian acquires knowledge of the commencement of the case; and (2) file an accounting of any property of the debtor, or proceeds, product, offspring, rents, or profits of such property, that, at any time, came into the possession, custody, or control of such custodian. **(c)** The court, after notice and a hearing, shall— (1) protect all entities to which a custodian has become obligated with respect to such property or proceeds, product, offspring, rents, or profits of such property; (2) provide for the payment of reasonable compensation for services rendered and costs and expenses incurred by such custodian; and (3) surcharge such custodian, other than an assignee for the benefit of the debtor’s creditors that was appointed or took possession more than 120 days before the date of the filing of the petition, for any improper or excessive disbursement, other than a disbursement that has been made in accordance with applicable law or that has been approved, after notice and a hearing, by a court of competent jurisdiction before the commencement of the case under this title. **(

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 101 — Definitions

In this title the following definitions shall apply: (1) The term “accountant” means accountant authorized under applicable law to practice public accounting, and includes professional accounting association, corporation, or partnership, if so authorized. (2) The term “affiliate” means— (A) entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities— (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or (ii) solely to secure a debt, if such entity has not in fact exercised such power to vote; (B) corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor, or by an entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities— (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or (ii) solely to secure a debt, if such entity has not in fact exercised such power to vote; (C) person whose business is operated under a lease or operating agreement by a debtor, or person substantially all of whose property is operated under an operating agreement with the debtor; or (D) entity that operates the business or substantially all of the property of the debtor under a lease or operating agreement. (3) The term “assisted person” means any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $150,000.11 See Adjustment of Dollar Amounts not

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 1208 — Conversion or dismissal

**(a)** The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable. **(b)** On request of the debtor at any time, if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. **(c)** On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter for cause, including— (1) unreasonable delay, or gross mismanagement, by the debtor that is prejudicial to creditors; (2) nonpayment of any fees and charges required under chapter 123 of title 28; (3) failure to file a plan timely under [section 1221 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section1221&num=0&edition=prelim); (4) failure to commence making timely payments required by a confirmed plan; (5) denial of confirmation of a plan under [section 1225 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section1225&num=0&edition=prelim) and denial of a request made for additional time for filing another plan or a modification of a plan; (6) material default by the debtor with respect to a term of a confirmed plan; (7) revocation of the order of confirmation under [section 1230 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section1230&num=0&edition=prelim), and denial of confirmation of a modified plan under [section 1229 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section1229&num=0&edition=prelim); (8) termination of a confirmed plan by reason of the occurrence

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 507 — Priorities

**(a)** The following expenses and claims have priority in the following order: (1) First: (A) Allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition in a case under this title, are owed to or recoverable by a spouse, former spouse, or child of the debtor, or such child’s parent, legal guardian, or responsible relative, without regard to whether the claim is filed by such person or is filed by a governmental unit on behalf of such person, on the condition that funds received under this paragraph by a governmental unit under this title after the date of the filing of the petition shall be applied and distributed in accordance with applicable nonbankruptcy law. (B) Subject to claims under subparagraph (A), allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition, are assigned by a spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative to a governmental unit (unless such obligation is assigned voluntarily by the spouse, former spouse, child, parent, legal guardian, or responsible relative of the child for the purpose of collecting the debt) or are owed directly to or recoverable by a governmental unit under applicable nonbankruptcy law, on the condition that funds received under this paragraph by a governmental unit under this title after the date of the filing of the petition be applied and distributed in accordance with applicable nonbankruptcy law. (C) If a trustee is appointed or elected under section 701, 702, 703, 1104, 1202, or 1302, the administrative expenses of the trustee allowed under paragraphs (1)(A), (2), and (6) of section 503(b) shall be paid before payment of claims under subparagraphs (A)

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 503 — Allowance of administrative expenses

**(a)** An entity may timely file a request for payment of an administrative expense, or may tardily file such request if permitted by the court for cause. **(b)** After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under [section 502(f) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section502/f&num=0&edition=prelim), including— (1) (A) the actual, necessary costs and expenses of preserving the estate including— (i) wages, salaries, and commissions for services rendered after the commencement of the case; and (ii) wages and benefits awarded pursuant to a judicial proceeding or a proceeding of the National Labor Relations Board as back pay attributable to any period of time occurring after commencement of the case under this title, as a result of a violation of Federal or State law by the debtor, without regard to the time of the occurrence of unlawful conduct on which such award is based or to whether any services were rendered, if the court determines that payment of wages and benefits by reason of the operation of this clause will not substantially increase the probability of layoff or termination of current employees, or of nonpayment of domestic support obligations, during the case under this title; (B) any tax— (i) incurred by the estate, whether secured or unsecured, including property taxes for which liability is in rem, in personam, or both, except a tax of a kind specified in [section 507(a)(8) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section507/a/8&num=0&edition=prelim); or (ii) attributable to an excessive allowance of a tentative carryback adjustment that the estate received, whether the taxable year t

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Federal law — U.S. Code and appendices · legal_authorities

11 U.S.C. § 752 — Customer property

**(a)** The trustee shall distribute customer property ratably to customers on the basis and to the extent of such customers’ allowed net equity claims and in priority to all other claims, except claims of the kind specified in [section 507(a)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section507/a/2&num=0&edition=prelim) that are attributable to the administration of such customer property. **(b)** (1) The trustee shall distribute customer property in excess of that distributed under subsection (a) of this section in accordance with [section 726 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section726&num=0&edition=prelim). (2) Except as provided in [section 510 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section510&num=0&edition=prelim), if a customer is not paid the full amount of such customer’s allowed net equity claim from customer property, the unpaid portion of such claim is a claim entitled to distribution under [section 726 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section726&num=0&edition=prelim). **(c)** Any cash or security remaining after the liquidation of a security interest created under a security agreement made by the debtor, excluding property excluded under [section 741(4)(B) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section741/4/B&num=0&edition=prelim), shall be apportioned between the general estate and customer property in the same proportion as the general estate of the debtor and customer property were subject to such security interest.

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