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Distribution of Estate Property in Chapter 7

Learn the rules governing how the estate's (usually) limited property is distributed to creditors and, sometimes, the debtor.


I. Introduction to Priority of Distribution in Chapter 7

In most chapter 7 cases, there simply isn't any nonexempt property to distribute to creditors. In these cases, the trustee normally files a report of no distribution and closes the case expeditiously. But if the estate does have nonexempt value for creditors, then Bankruptcy Code § 726 directs how that value gets doled out. Put another way, § 726 divides the universe of potential claims into discrete categories and establishes priority...