Thawing the Freeze: Cutting Costs and Increasing Efficiency by Granting Administrative Expense Priority to Nonquantifiable Benefits

Disputes over priority claims in bankruptcy proceedings are common because they are often the only way to recover assets from the limited pool available to claimants. Claims for professional fees for those who facilitate bankruptcy proceedings after the petition has been filed are given high priority to ensure that they have incentive to complete their work. However, those who come into bankruptcy with claims against the debtor have a much harder time recovering their costs if they do any work to assist with the proceedings. Currently, the administrative expense analysis requires these applicants to demonstrate that they made a substantial contribution to the estate before receiving priority on their claims for reimbursement. Courts overwhelmingly deny requests for administrative expenses under § 503 of the Bankruptcy Code because the applicant did not make a quantifiable benefit to the estate. This Comment calls upon the Federal Judiciary and Congress to allow administrative expense priority for reasonable expenses to applicants who benefit the estate without being duplicative, self-interested, or meritless, but are unable to directly quantify how they did so. For applicants and their attorneys, this Comment serves as a guide on requesting administrative expense priority for costs incurred when a direct benefit cannot be shown. The current substantial contribution analysis will be discussed to show why it should not require a benefit to be quantifiable. First, the types of potential applicants for this priority claim will be analyzed to demonstrate how each can benefit the estate in ways that are not quantifiable under the current interpretation of § 503(b)(3)(D). The language that courts commonly use to convey the rationale of a substantial contribution analysis will be discussed to show that precedent does not preclude the proposed interpretation. An interpretation is provided for the existing text of § 503(b)(3)(D) that would allow courts to make this change on a case by case basis. Finally, a change to the text of § 503(b)(3)(D) that would allow Congress to implement this change directly is provided as a model