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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Obtaining Administrative Claim Status When Doing Business With a Debtor

By By Andrew C. Kassner and Joseph N. Argentina Jr.
August 01, 2021

The Bankruptcy Code encourages service and good suppliers to continue to do business with a company in Chapter 11 by providing that amounts owed for post-petition services and deliveries are eligible to receive administrative claim status if they provide a benefit to the estate, meaning that their claims are paid in full before pre-petition unsecured claims. But how is administrative claim status obtained in a bankruptcy case, and what risks does a service or goods supplier take by continuing to do business with the debtor after commencement of the bankruptcy case?

Judge Craig Goldblatt of the U.S. Bankruptcy Court for the District of Delaware recently considered the contours of the "benefit to the estate" rule in In re MTE Holdings, (Case No. 19-12269 (CTG)). In an opinion dated June 2, 2021, Goldblatt granted administrative claim status to a consulting service provider and ruled a noninsider third party that provides goods or services to a debtor-in-possession on ordinary commercial terms does not have to prove that receipt of those goods or services led to success of the venture or increased profits for the debtor.

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