Contact: John Hartgen
             703-739-0800
             [email protected]

UNREIMBURSED MEDICAL EXPENSES OF RETIREES ENTITLED TO PRIORITY STATUS IN BANKRUPTCY PROCEEDING, ACCORDING TO LATEST ABI POLL

August 21, 2007, Alexandria, Va. —A majority of respondents (52 percent) to ABI’s latest online poll agreed that unreimbursed medical expenses incurred by retirees of a bankrupt firm are entitled to priority status under the Bankruptcy Code. Forty-two percent of respondents “strongly agreed” and 10 percent “somewhat agreed” that unreimbursed medical expenses incurred by retirees are entitled to priority status in a bankrupt firm’s proceeding under §507(a)(5), subject to the temporal and dollar limitations set forth in the section.

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. 

ABI members and members of the public were welcome to submit their response to the statement: “Subject to the temporal and dollar limitations set forth in §507(a)(5), unreimbursed medical expenses incurred by retirees of a bankrupt firm are entitled to priority status under §507(a)(5). (In re Consolidated Freightways Corp. of Delaware, (Bankr. C.D. Cal. No. RS02-24284 MG 4/26/07). The latest ABI Quick Poll was open to the public for voting from August 3-16.

ABI’s weekly Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,500 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.