11 U.S.C. §507 Priority Claims: The Professor’s Guide to Current Caps & Order

Understanding the Bankruptcy Code: Priority Claims (11 U.S.C. § 507)

As a professor published in Consumer Bankruptcy Law, I frequently encounter outdated and confusing summaries of the U.S. Bankruptcy Code, particularly regarding 11 U.S.C. (Priority Claims). Understanding the correct hierarchy for distributing funds is necessary to determine your best options when filing for bankruptcy.

§507 of the Bankruptcy Code Key Points

• Tax Claims are §507(a)(8): Tax claims are the Eighth priority, not the Seventh. Older legal sources that refer to §507(a)(7) are outdated due to the 2005 BAPCPA amendments.
• DSO is Top Priority: The highest priority claim is now Domestic Support Obligations (DSO), found in §507(a)(1).
• Current Wage Cap: The priority for unpaid wages (§507(a)(4)) is capped at the current statutory dollar amount, which adjusts every three years. Check the latest figure against the §507 text to ensure accuracy.
• Must be Paid in Full: All unsecured claims classified as §507 priorities must be paid in full over the life of a Chapter 13 plan. These claims often determine the feasibility of the plan.
• Taxes and DSO: Tax claims that receive §507(a)(8) priority are generally considered non-dischargeable under §523(a)(1) in Chapter 7 and Chapter 11 cases.

To fully understand the Trustee’s power and your risk when it comes to your assets, we must examine the statute that governs the order in which debts get paid: Section 507 of the Bankruptcy Code.

This section dictates which creditors have “priority,” meaning they must be paid before general unsecured creditors get anything. General unsecured creditors typically include credit cards and personal loans.

The amount and types of these priority claims, especially taxes, often determine whether a Chapter 13 plan is filed or a liquidation of assets in Chapter 7.

Deep Dive: Section 507 of the Bankruptcy Code

As a published professor of Consumer Bankruptcy Law (see links below), I often find that summaries of the Bankruptcy Code contain outdated priority amounts, making them confusing for debtors and professionals alike, and the mistakes can be costly! I’m going through those different sections and have updated a few already on Bankruptcy.blog.

Below is the summary of the most critical priority claims you need to understand when filing for bankruptcy.

Summary of Priority Claims (11 U.S.C. § 507)

Section 507 creates a list of unsecured claims that are paid in full before any general unsecured claims. The following are the most common priority claims affecting consumer filers:

Priority Class	General Summary	Relevance to Debtor
(a)(1)	Domestic Support Obligations (DSO)	Unpaid alimony or child support. This is the highest priority debt and is generally non-dischargeable.
(a)(2)	Administrative Expenses	Fees and costs of administering the case (e.g., Trustee’s compensation and attorney fees). These are paid early.
(a)(3) or (a)(4)	Wages/Salaries	Unpaid wages, salaries, or commissions earned by employees.
(a)(7) or (a)(8)	Taxes	Certain, recent income taxes and other specified tax debts. This is the most complex area for most filers.

The Current Financial Impact: Updated (a)(3) & (a)(4) Caps

The most common area where online sources become quickly outdated is the statutory cap on priority claims for wages and employee benefits. These amounts are adjusted periodically to account for inflation.

Statutory Section	Priority Claim Type	Current Priority Cap	What This Means for You
(a)(4)	Wages, Salaries, Commissions	per individual (earned within 180 days before filing).	If your employer goes bankrupt, this is the maximum amount of wages that are guaranteed to be paid.
(a)(5)	Employee Benefit Plan Contributions	multiplied by the number of employees (minus any amounts paid under Class 4).	This protects benefits owed to employees, but the cap remains the same as Class 4.

Note: These amounts were last adjusted on April 1, 2022, and are due to be adjusted again in April of 2025.

Why Priority Matters in Your Filing

The Priority Claim List is critical because:

• Chapter 7: Assets that are liquidated by the Trustee must be paid out in this exact order. If there are no assets, it doesn’t impact you, but the type of debt (like DSO) remains non-dischargeable.
• Chapter 13: Any unsecured priority debt (like certain tax claims or a DSO arrearage) must be paid in full over the life of your 3- to 5-year repayment plan. The larger the priority debt, the higher your required monthly payment, and the more likely you are to be unable to complete the plan.

Here’s an Example of the Error(s) with Other Sites Regarding the Bankruptcy Code

As of 2025, the correct, current priority class for most tax claims owed to a governmental unit is (a)(8). As you can see above, I listed (a)(7) and (8). Why? Because Congress, through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), renumbered the priority classes. So it’s likely that older legal summaries and resources still have “outdated” content. In this case, not only is the section outdated, but so are the amounts.

This is why I have been consistently stating to double, triple, and quadruple check the amounts, regardless of what state the bankruptcy is filed. I have even come across, in preparing blog posts on exemptions, where even the link to the state statute is outdated.

Also, notice the same issue occurred with (a)(3) and (a)(4).

The Current Statutory Numbering for Tax Claims

The controlling section of the Bankruptcy Code for priority tax claims is 11 U.S.C. ¹(a)(8).

Priority Class	Subject	Current Statutory Reference
First	Domestic Support Obligations (DSO)	(a)(1)
Seventh	Deposits for Purchase/Lease (e.g., security deposits)	(a)(7)
Eighth	Taxes and Certain Other Governmental Claims	(a)(8)

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

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