Duhaime's Law Dictionary


Absolute Priority Rule Definition:

The highest rank amongst creditors; he who gets paid in full before any other creditor.

Related Terms: Bankruptcy

A rule of American bankruptcy law.

Stated by Justice Sigmund in HH Distributions as follows:

"[T]he absolute priority rule ... requires a dissenting class of creditors to be paid in full before any junior class can receive property under a plan."

In 2008, Justice Sotomayor, at footnote 5, Adelphia Communications, wrote of the absolute priority rule:

"In its current statutory form, this rule provides that, with respect to a class of unsecured claims, the holder of any claim or interest that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property."

REFERENCES:

  • In re Adelphia Communications Corp., 544 F. 3d 420 (United States Court of Appeals, 2008)
  • In re HH Distributions, 400 BR 44 (United States Bankruptcy Court, E.D. Pennsylvania, 2009)
  • United States Code, Chapter 11 (Bankruptcy), §1129

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