The Threshold of Distribution: Ranking of Rights and Participation in the Proceedings

Abstract

This volume asks in what cases distribution is not received even where a right to preferential payment exists. Ranking under substantive law and the status to receive distribution in the execution proceedings must both be satisfied. Priority alone cannot erase the participation requirements and the objection procedure. The path to relief opens where the creditor holds statutory participating status and has made any required demand for distribution and, after an objection, submits the appropriate suit and documents within the deadline, and closes where a creditor required to demand distribution has missed the closing date, or where the objection is deemed withdrawn because, after the objection, proof of filing of the statutory suit or the like was not submitted. The six sections address, in turn, eligibility to demand distribution, rights whose time for demand has passed, the exception for already registered rights, burdens remaining after the sale, what in the distribution schedule is contested, and the litigation required after an objection. The strongest counterargument is as follows. It is unjust for claims that deserve protection to be pushed back because of a formal omission of a demand for distribution. Valuation of rehabilitation secured claims, the substantive ranking of labor claims in insolvency, and urgent preservation are not addressed in this volume.