Unreimbursed Medical Expenses of Retirees Entitled to Priority Status in Bankruptcy Proceeding According to Latest ABI Poll
Contact: John Hartgen
MEDICAL EXPENSES OF RETIREES ENTITLED TO PRIORITY STATUS IN BANKRUPTCY
PROCEEDING, ACCORDING TO LATEST
August 21, 2007, Alexandria,
Va. —A majority of respondents (52 percent) to
Twenty-nine percent of respondents, however, did not agree that medical expenses of retirees should receive a priority status under §507(a)(5). Twenty percent “strongly disagreed” and 9 percent “somewhat disagreed” that unreimbursed medical expenses incurred by retirees of a bankrupt firm are entitled to a priority status under §507(a)(5), subject to the temporal and dollar limitations set forth in the section. Seventeen percent of the respondents did not know or had no opinion on the issue.
The U.S. Bankruptcy Court for the Southern District of California recently ruled in In re Consolidated Freightways Corp. of Delaware (Bankr. C.D. Cal. No RS02-24284 4/26/07) that retiree medical expenses are entitled to priority status under §507(a)(5), subject to the temporal and dollar limitations set forth in the section. The court noted that the legislative history and the public policy behind §507(a)(5) compelled it to include retired employees within the cap amount for a priority status claim.