Since the adoption of title 11 of the United States Code (the “Bankruptcy Code”), courts have struggled with the application of administrative expense claims. Administrative expenses include the actual costs and expenses of preserving the estate after the commencement of a bankruptcy case. Allowance of an administrative expense claim is governed by section 503 of the Bankruptcy Code. A question arises, however, whether the rules of governing the allowance of claims, under section 502, also applies to administrative expense claims.
Under section 502(d), a court may “disallow any claim of any entity from which property is recoverable . . . or that is a transferee of a transfer avoidable . . . unless such entity or transferee has paid the amount or turned over any such property, for which such entity or transferee is liable.” Although administrative expense claims are not mentioned within section 502(d), some courts determined this section applies to these claims. However, most courts disagree with that interpretation.
This article discusses whether the rules for disallowance of claims, under section 502(d), applies to administrative expense claims. Part I analyzes the majority opinions within the courts, establishing that section 502(d) does not apply to administrative expense claims. Part II discusses the minority view that section 502(d) applies to disallow administrative expense claims.