Bankruptcy & Finance

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Gordon Rees Scully Mansukhani, LLP

Megan Adeyemo

Executive Editor, Bankruptcy & Finance
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Robinson and Cole

Michael Enright

Contributing Editor, Bankruptcy & Finance
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Goods, Services and Bankruptcy Code Section 503(b)(9)

By Michael Enright

Section 503(b)(9) of the Bankruptcy Code, which provides for an administrative claim in favor of the seller of goods to a debtor equal in amount to the value of the goods the seller delivered in the 20 days prior to the bankruptcy petition, was added to the Code in 2005. It has spawned far-flung litigation ever since over what are goods (notably with regard to electricity), what are not goods, and what is the test to use for deciding that all-important question. The statute specifies that only the value of the goods qualifies for administrative claim status. Of course, commercial contracts that call for some delivery of goods by the seller often call for a mixed bag for the buyer, because services might be involved as well. Does the hybrid nature of the underlying contract that caused the vendor to deliver goods to the debtor in the 20 days pre-petition matter for determining the amount of the administrative claim? That question was recently answered by the court in In re Sklar Exploration Company, LLC, Case No. 20-12377 (Bankr. D. Colo. March 14, 2022).

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