Check employee wage claims against a secured claim in a bankruptcy
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- From the petition date or the date the business ceased, whichever the lawyer identifies as first, the tool lists wages, salaries, or commissions, including vacation, severance, and sick-leave pay, earned by an individual within 180 days, and any sales commissions that meet the one-employee and 75 percent tests. It applies a dollar cap only after the lawyer confirms the current adjusted amount. It does not rank the claim ahead of a lien.
- What the lawyer must review
- 11 U.S.C. §§ 507(a)(4) and 506(a). Section 507(a)(4) is a fourth-priority unsecured claim, only to the statutory cap, for wages, salaries, or commissions, including vacation, severance, and sick-leave pay, earned by an individual within 180 days before the petition or the cessation of the debtor's business, whichever occurs first. The same paragraph covers sales commissions of an individual, or of a corporation with only one employee, acting as an independent contractor in the ordinary course of the debtor's business, if at least 75 percent of the amount that person earned as such a contractor in the 12 months preceding that date was earned from the debtor. The Code text prints $10,000, with a footnote to the Adjustment of Dollar Amounts note. That note, by notice dated 30 January 2025, 90 F.R. 8941, effective 1 April 2025, records that the dollar amount in subsection (a)(4) was adjusted from 15,150 to 17,150. Section 506(a)(1) makes an allowed claim secured by a lien a secured claim to the extent of the value of the creditor's interest in the estate's interest in the property, and an unsecured claim for the remainder. The lawyer confirms the cap against 11 U.S.C. § 104 before use.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes identifying points for review. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.