Who gets paid first in a bankruptcy case?

Secured creditors look first to their collateral, because their rights run against specific property rather than against the general pool. Among unsecured claims, 11 U.S.C. § 507(a) sets the order: domestic support obligations first, administrative expenses of the estate second, and further ranks after that, with general unsecured creditors last. Whether anything reaches the general unsecured rank depends on what the estate holds.

Can one debt be both secured and unsecured?

Yes. Under 11 U.S.C. § 506(a), a claim is secured up to the value of the creditor's interest in the property and unsecured for the amount above that. A second mortgage on a home worth less than the first mortgage balance is the usual example. The creditor is still listed once, on the secured schedule, with the unsecured portion shown in its own column (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).

How is the collateral valued?

For an individual in a chapter 7 or chapter 13 case, personal property securing an allowed claim is valued at replacement value as of the date the petition was filed, without deducting costs of sale or marketing. For property acquired for personal, family, or household purposes, replacement value means the price a retail merchant would charge for property of that kind, considering its age and condition (11 U.S.C. § 506(a)(2)).

Does a creditor whose collateral is worth more than the debt get anything extra?

It can. Where an allowed secured claim is secured by property worth more than the claim, 11 U.S.C. § 506(b) allows the holder interest on the claim plus any reasonable fees, costs, or charges provided for under the agreement or state statute the claim arose under. The trustee may also recover from that property the reasonable, necessary costs of preserving or disposing of it (11 U.S.C. § 506(c)).

Can the court clerk tell me whether my claim is secured or priority?

No. One bankruptcy court answers that question directly: it is a legal question, and clerk's office employees may not give legal advice. The court points people to the bankruptcy glossary and, if they are still unsure, to complete the claim to the best of their ability (Bankr. D. Minn. official page — Is my claim secured or priority?). A bankruptcy lawyer can answer it for a specific situation.

What is an administrative expense?

Generally, an expense that arises after a bankruptcy case is filed in connection with operating, liquidating, or distributing the bankruptcy estate (Bankr. M.D. Ga. official guidance — Proof of Claim Instructions). Administrative expenses hold the second rank in 11 U.S.C. § 507(a), which also places certain fees and charges assessed against the estate at that level.

Fundamentals

Priority, secured, and unsecured claims in bankruptcy

Bankruptcy sorts debts into three groups. A secured claim is backed by a lien and counts as secured only up to the value of the collateral, with the rest treated as unsecured (11 U.S.C. § 506(a)). Priority unsecured claims, such as domestic support and certain taxes, are paid ahead of other unsecured claims (11 U.S.C. § 507(a)). General unsecured claims are paid last.

Key points

A secured claim is backed by a lien on specific property; an unsecured claim carries no rights against specific property.
A claim is secured only up to the value of the creditor's interest in the property, and unsecured for the amount above that (11 U.S.C. § 506(a)).
Priority claims are unsecured claims the Code ranks ahead of general unsecured claims, in the order set by 11 U.S.C. § 507(a).
Domestic support obligations lead the priority list; ordinary debts such as credit card and medical bills sit at the back as general unsecured claims.
Which category a claim falls into is a legal question, and court clerks are not permitted to answer it for you.

If you are looking at a stack of bills and trying to work out which ones bankruptcy treats differently, this is the distinction that does most of the work. Bankruptcy does not treat every debt alike: it sorts each one into a secured, priority unsecured, or general unsecured claim, and that label largely determines who gets paid and in what order. This page explains what each term means and where the rules come from.

What are priority, secured, and unsecured claims, exactly?

Every debt you owe becomes a claim in a bankruptcy case, and a claim is simply a creditor's right to payment. The Code sorts claims by how they are treated, not by how large they are. A secured claim is backed by a lien on specific property (the collateral), such as a house with a mortgage or a car with a loan against it, and the creditor has rights against that property if the debt is not paid. An unsecured claim carries no rights against specific property. Unsecured claims then divide again. A priority unsecured claim is one the Bankruptcy Code requires to be paid before most other unsecured claims, commonly certain income taxes and past-due alimony or child support. A nonpriority, or general, unsecured claim is generally paid after those, commonly credit card bills, medical bills, and educational loans (U.S. Bankr. Ct. D. Ariz., Instructions for Completing the Bankruptcy Petition, Schedules and Statements).

Why does the category of a claim matter in a bankruptcy case?

Category decides who gets paid, in what order, and out of what. Most bankruptcy cases involve more debts than assets available to pay them, so the court needs to know as much as possible about each creditor to make sure claims are treated according to the rules (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals). A secured creditor looks first to its collateral. A priority creditor stands ahead of the general unsecured line. General unsecured creditors share whatever is left, which in many cases is little or nothing. 11 U.S.C. § 507(a) states the order directly: the expenses and claims it lists have priority in the following order. The category also drives the paperwork. Secured claims are reported on Schedule D, unsecured claims on Schedule E/F, and a creditor already listed on Schedule D is not listed a second time on Schedule E/F (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).

How does the Code decide who gets paid first?

11 U.S.C. § 507(a) is the ranking. It opens by stating that the expenses and claims it lists have priority in the following order, then numbers them. Domestic support obligations owed to a spouse, former spouse, or child of the debtor (or that child's parent, legal guardian, or responsible relative) come first. Administrative expenses of the estate come second, together with certain fees and charges assessed against the estate. Wages, salaries, and commissions earned within 180 days before the petition date, or before an earlier cutoff the paragraph specifies, come further down and are capped per individual at an amount the statute sets. Later categories include certain unpaid taxes under 11 U.S.C. § 507(a)(8). Secured claims sit outside this list entirely, because a secured creditor's rights run against its collateral rather than against the pool of money available to unsecured creditors.

The opening ranks of 11 U.S.C. § 507(a)
Rank	What it covers	Provision
First	Domestic support obligations owed to or recoverable by a spouse, former spouse, or child of the debtor (or that child's parent, legal guardian, or responsible relative)	11 U.S.C. § 507(a)(1)
Second	Administrative expenses of the estate, plus certain fees and charges assessed against the estate	11 U.S.C. § 507(a)(2)
Third	A further class of unsecured claims the statute specifies	11 U.S.C. § 507(a)(3)
Fourth	Wages, salaries, and commissions earned within 180 days before filing, capped per individual	11 U.S.C. § 507(a)(4)
Later ranks	Additional categories, including certain unpaid taxes	11 U.S.C. § 507(a)(8)
Outside the list	Secured claims, whose rights run against the collateral	11 U.S.C. § 506(a)

What are the main limits and exceptions?

Two limits do most of the work. A secured claim is secured only up to the value of the creditor's interest in the estate's interest in the property, and it is unsecured to the extent the claim exceeds that value (11 U.S.C. § 506(a)). A second mortgage on a home worth less than the first mortgage balance is the standard illustration: part of the claim is treated as secured and the remainder becomes a general unsecured claim. Priority is capped and time-limited rather than open-ended, as the wage category shows. Valuation follows its own rule. For an individual in a chapter 7 or chapter 13 case, personal property securing an allowed claim is valued at replacement value as of the petition date, with no deduction for costs of sale or marketing, and for goods acquired for personal, family, or household use, replacement value means what a retail merchant would charge given its age and condition (11 U.S.C. § 506(a)(2)).

How does this differ between Chapter 7 and Chapter 13?

The categories are the same in both chapters. 11 U.S.C. § 506 and 11 U.S.C. § 507 sit in the Code's general provisions, and valuation is the same for an individual in a chapter 7 or chapter 13 case (11 U.S.C. § 506(a)(2)). What differs is the machinery that pays claims. A chapter 13 case pays claims through a court-confirmed plan administered by a trustee, so the plan's terms and the claims process shape what each creditor receives. One district's local rule shows the mechanics: the trustee disburses on a secured claim only where the plan provides for it and the claim has been allowed, and a proof of claim must be timely filed or allowed by court order to receive any disbursement (Bankr. D. Utah LBR 2083-2). This page does not restate chapter 13's plan-content rules or chapter 7's distribution order, and local practice varies, so those are questions for a lawyer in the district where the case sits.

What do people most commonly get wrong?

Three mix-ups are common. The first is treating priority as a synonym for secured. 11 U.S.C. § 507(a) ranks allowed unsecured claims; a priority claim has no collateral behind it, it stands earlier in the unsecured line. The second is assuming that calling part of a claim unsecured makes the lien disappear. How a claim is classified and what happens to a lien are separate questions under separate provisions, and a lien is defined as a charge against or interest in property to secure payment of a debt (11 U.S.C. § 101). The third is leaving a debt off because the amount is uncertain. Claims that are contingent, unliquidated, or disputed still have to be listed (U.S. Bankr. Ct. D. Ariz., Instructions for Completing the Bankruptcy Petition, Schedules and Statements). Finally, court clerks cannot tell you whether a particular claim is secured or priority, because that is a legal question (Bankr. D. Minn. official page — Is my claim secured or priority?).

Frequently asked questions

What is the difference between a priority claim and a general unsecured claim?: Both are unsecured, meaning neither carries rights against specific property. A priority unsecured claim is one the Bankruptcy Code requires to be paid before most other unsecured claims, commonly certain income taxes and past-due alimony or child support. A nonpriority, or general, unsecured claim is generally paid after those, and typically includes credit card bills, medical bills, and educational loans (U.S. Bankr. Ct. D. Ariz., Instructions for Completing the Bankruptcy Petition, Schedules and Statements).
Who gets paid first in a bankruptcy case?: Secured creditors look first to their collateral, because their rights run against specific property rather than against the general pool. Among unsecured claims, 11 U.S.C. § 507(a) sets the order: domestic support obligations first, administrative expenses of the estate second, and further ranks after that, with general unsecured creditors last. Whether anything reaches the general unsecured rank depends on what the estate holds.
Can one debt be both secured and unsecured?: Yes. Under 11 U.S.C. § 506(a), a claim is secured up to the value of the creditor's interest in the property and unsecured for the amount above that. A second mortgage on a home worth less than the first mortgage balance is the usual example. The creditor is still listed once, on the secured schedule, with the unsecured portion shown in its own column (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).
How is the collateral valued?: For an individual in a chapter 7 or chapter 13 case, personal property securing an allowed claim is valued at replacement value as of the date the petition was filed, without deducting costs of sale or marketing. For property acquired for personal, family, or household purposes, replacement value means the price a retail merchant would charge for property of that kind, considering its age and condition (11 U.S.C. § 506(a)(2)).
Does a creditor whose collateral is worth more than the debt get anything extra?: It can. Where an allowed secured claim is secured by property worth more than the claim, 11 U.S.C. § 506(b) allows the holder interest on the claim plus any reasonable fees, costs, or charges provided for under the agreement or state statute the claim arose under. The trustee may also recover from that property the reasonable, necessary costs of preserving or disposing of it (11 U.S.C. § 506(c)).
Can the court clerk tell me whether my claim is secured or priority?: No. One bankruptcy court answers that question directly: it is a legal question, and clerk's office employees may not give legal advice. The court points people to the bankruptcy glossary and, if they are still unsure, to complete the claim to the best of their ability (Bankr. D. Minn. official page — Is my claim secured or priority?). A bankruptcy lawyer can answer it for a specific situation.
What is an administrative expense?: Generally, an expense that arises after a bankruptcy case is filed in connection with operating, liquidating, or distributing the bankruptcy estate (Bankr. M.D. Ga. official guidance — Proof of Claim Instructions). Administrative expenses hold the second rank in 11 U.S.C. § 507(a), which also places certain fees and charges assessed against the estate at that level.

Sources

By Antonio G. Jimenez, Esq. · Florida Bar No. 21022

Sources verified August 2, 2026 · How we verify

Every figure on this page is drawn from a primary legal source and checked against our canonical legal database before publication. Bankruptcy.law is not a law firm and does not provide legal advice.

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