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§ 726. Distribution of prop­er­ty of the es­tate

(a) Distribution rules for liq­ui­da­tion cases

(b) Distribution rules for claims with­in a par­tic­u­lar class

(c) Community Prop­er­ty Distribution Rules

(a) Ex­cept as pro­vided in sec­tion 510 of this ti­tle, prop­er­ty of the es­tate shall be dis­trib­uted—

(1) first, in pay­ment of claims of the kind spe­ci­fied in, and in the or­der spe­ci­fied in, sec­tion 507 of this ti­tle, proof of which is time­ly filed un­der sec­tion 501 of this ti­tle or tar­di­ly filed on or be­fore the ear­li­er of—

(A) the date that is 10 days af­ter the mail­ing to cred­i­tors of the sum­mary of the trust­ee’s fi­nal re­port; or

(B) the date on which the trust­ee com­mences fi­nal dis­tri­bu­tion un­der this sec­tion;

(2) second, in pay­ment of any al­lowed un­se­cured claim, oth­er than a claim of a kind spe­ci­fied in par­a­graph (1), (3), or (4) of this sub­sec­tion, proof of which is—

(A) time­ly filed un­der sec­tion 501(a) of this ti­tle;

(B) time­ly filed un­der sec­tion 501(b) or 501(c) of this ti­tle; or

(C) tar­di­ly filed un­der sec­tion 501(a) of this ti­tle, if—

(i) the cred­i­tor that holds such claim did not have no­tice or ac­tu­al knowl­edge of the case in time for time­ly fil­ing of a proof of such claim un­der sec­tion 501(a) of this ti­tle; and

(ii) proof of such claim is filed in time to per­mit pay­ment of such claim;

(3) third, in pay­ment of any al­lowed un­se­cured claim proof of which is tar­di­ly filed un­der sec­tion 501(a) of this ti­tle, oth­er than a claim of the kind spe­ci­fied in par­a­graph (2)(C) of this sub­sec­tion;

(4) fourth, in pay­ment of any al­lowed claim, wheth­er se­cured or un­se­cured, for any fine, pen­al­ty, or for­fei­ture, or for mul­ti­ple, ex­em­pla­ry, or pu­ni­tive dam­ages, aris­ing be­fore the ear­li­er of the or­der for re­lief or the ap­point­ment of a trust­ee, to the ex­tent that such fine, pen­al­ty, for­fei­ture, or dam­ages are not com­pen­sa­tion for ac­tu­al pe­cu­ni­ary loss suf­fered by the hold­er of such claim;

(5) fifth, in pay­ment of in­ter­est at the le­gal rate from the date of the fil­ing of the pe­ti­tion, on any claim paid un­der par­a­graph (1), (2), (3), or (4) of this sub­sec­tion; and

(6) sixth, to the debt­or.

(b) Payment on claims of a kind spe­ci­fied in par­a­graph (1), (2), (3), (4), (5), (6), (7), (8), (9) or (10) of sec­tion 507(a) of this ti­tle, or in par­a­graph (2), (3), (4), or (5) of sub­sec­tion (a) of this sec­tion, shall be made pro rata among claims of the kind spe­ci­fied in each such par­tic­u­lar par­a­graph, ex­cept that in a case that has been con­vert­ed to this chap­ter un­der sec­tion 1112, 1208, or 1307 of this ti­tle, a claim al­lowed un­der sec­tion 503(b) of this ti­tle in­curred un­der this chap­ter af­ter such con­ver­sion has pri­or­i­ty over a claim al­lowed un­der sec­tion 503(b) of this ti­tle in­curred un­der any oth­er chap­ter of this ti­tle or un­der this chap­ter be­fore such con­ver­sion and over any ex­penses of a cus­to­di­an su­per­seded un­der sec­tion 543 of this ti­tle.

(c) Not­with­stand­ing sub­sec­tions (a) and (b) of this sec­tion, if there is prop­er­ty of the kind spe­ci­fied in sec­tion 541(a)(2) of this ti­tle, or pro­ceeds of such prop­er­ty, in the es­tate, such prop­er­ty or pro­ceeds shall be seg­re­gated from oth­er prop­er­ty of the es­tate, and such prop­er­ty or pro­ceeds and oth­er prop­er­ty of the es­tate shall be dis­trib­uted as fol­lows:

(1) Claims al­lowed un­der sec­tion 503 of this ti­tle shall be paid ei­ther from prop­er­ty of the kind spe­ci­fied in sec­tion 541(a)(2) of this ti­tle, or from oth­er prop­er­ty of the es­tate, as the in­ter­est of jus­tice re­quires.

(2) Al­lowed claims, oth­er than claims al­lowed un­der sec­tion 503 of this ti­tle, shall be paid in the or­der spe­ci­fied in sub­sec­tion (a) of this sec­tion, and, with re­spect to claims of a kind spe­ci­fied in a par­tic­u­lar par­a­graph of sec­tion 507 of this ti­tle or sub­sec­tion (a) of this sec­tion, in the fol­low­ing or­der and man­ner:

(A) First, com­mu­ni­ty claims against the debt­or or the debt­or's spouse shall be paid from prop­er­ty of the kind spe­ci­fied in sec­tion 541(a)(2) of this ti­tle, ex­cept to the ex­tent that such prop­er­ty is sole­ly li­a­ble for debts of the debt­or.

(B) Second, to the ex­tent that com­mu­ni­ty claims against the debt­or are not paid un­der sub­par­a­graph (A) of this par­a­graph, such com­mu­ni­ty claims shall be paid from prop­er­ty of the kind spe­ci­fied in sec­tion 541(a)(2) of this ti­tle that is sole­ly li­a­ble for debts of the debt­or.

(C) Third, to the ex­tent that all claims against the debt­or in­clud­ing com­mu­ni­ty claims against the debt­or are not paid un­der sub­par­a­graph (A) or (B) of this par­a­graph such claims shall be paid from prop­er­ty of the es­tate oth­er than prop­er­ty of the kind spe­ci­fied in sec­tion 541(a)(2) of this ti­tle.

(D) Fourth, to the ex­tent that com­mu­ni­ty claims against the debt­or or the debt­or's spouse are not paid un­der sub­par­a­graph (A), (B), or (C) of this par­a­graph, such claims shall be paid from all re­main­ing prop­er­ty of the es­tate.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2608; Pub. L. 98-353, ti­tle III, § 479, July 10, 1984, 98 Stat. 381; Pub. L. 99-554, ti­tle II, § 257(r), 283(s), Oct. 27, 1986, 100 Stat. 3115, 3118; Pub. L. 103-394, ti­tle II, § 213(b), ti­tle III, § 304(h)(5), ti­tle V, § 501(d)(24), Oct. 22, 1994, 108 Stat. 4126, 4134, 4146; Pub. L. 109-8, Title VII, § 713, Title XII, § 1215, April 20, 2005, 119 Stat. 128, 195.)

HISTORICAL AND REVISION NOTES (11 U.S.C. § 726)

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Page Last Updated:  April 28, 2013