Ranks of Claims
Creditor ranking and classes are regulated under Article 206 of Enforcement and Bankruptcy Law (EBL). According to Art. 206 of EBL there are 4 classes respectively:
a. Secured claims class;
b. Priority claims class;
c. Preferential claims class; and
d. Ordinary claims class.
Debts (claims) of bankruptcy estate: Debts that arose after the commencement of bankruptcy liquidation (on the date and hour of the bankruptcy decision) are accepted as debts of the estate. Typically, these claims are based on the transactions of the bankruptcy administration, such as rent payments or salary of employees, expenses and costs incurred during the bankruptcy liquidation, fees of bankruptcy administration, costs and fees related to litigation or arbitration commenced against the bankruptcy estate during the bankruptcy liquidation.
Secured claims: Secured creditors have an absolute priority right on the proceed of the collateral equal to the secured amount. Any remaining part that is not met from the proceed of the collateral will be an ordinary claim.
Priority claims: Public receivables arising from an asset, such as customs duty, property tax, inheritance and transfer tax, motor vehicle tax, are paid first over the proceeds of that asset. Likewise, lawyer fees have priority over the proceeds of an asset or amount that client has retained or won as a result of the lawyer’s own work.
Preferential (privileged) claims: Under Article 206 of EBL the first three ranks are accepted as privileged claims:
1st rank: Employee claims that arose or became due not more than 1 year prior to the bankruptcy decision. Employer’s debt owed to facilities and associations formed for the purpose of establishing or maintaining aid funds or other aid organizations for employees. Alimony claims that arose or became due not more than 1 year prior to the bankruptcy decision.
2nd rank: Guardianship and custody claims.
3rd rank: Claims specified as privileged in special laws, such as state income and corporate taxes, unpaid social security contributions.
4th rank: All other claims are accepted as non-preferential (ordinary) claims.