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Am I "priority" or "unsecured" in my Chapter 11 Proof of Claim?

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moecalifornia

Junior Member
California
Last year I worked as a freelance designer for a company that filed chapter 11. I filed a proof of claim with the bankruptcy court citing a "priority" claim as they still owe me around $2,000.00 in unpaid wages. I recently received a "Notice of Debtors' Fifth Omnibus Objection to Claims (Substantive) and Motion to Reduce and/or Reclassify Such Claims" packet in the mail telling me my claim has been reclassified from "priority" to "unsecured." They aren't objecting the amount owed, just the classification. Do I need to object to this change (as it states I must do in writing by a certain date in order to have the objection seen by the court), or will my claim still be considered with out it?
Additionally, I submitted as proof of my employment my initial contract and all signed unpaid invoices. All wages were earned within 180 days of the company filing for bankruptcy as stated on the proof of claim form under #5 Amount of Claim Entitled to Priority under 11 U.S.C. 507(a). I checked the box as stated.
I am concerned that changing my status from "priority" to "unsecured" with lessen the chances I ever get paid the money they still owe me.
Their reason listed for modification is "Claimant improperly filed in the incorrect class." However, I believe wages fall into the "priority" category.
Should I object to the change?
 


Some Random Guy

Senior Member
You are confusing your status with that of an employee.

You appear to be ain independent contractor who was a vendor for the business, selling them your services as per your contract. You would then invoice them for your services.

Your claim is for unpaid invoices, NOT unpaid wages. Hence the change to an "unsecured" status.

Putting up with these non-payment hassles is one of the reasons why independent contractors (freelancers) get paid a higher hourly rate than actual employees.
 

moecalifornia

Junior Member
I understand your suggestion that the claim is for unpaid invoices, not wages, however Section 507(a)(4)(B), authorizes an independent contractor to file a priority claim for ordinary course goods or services, provided that at least 75% of the amount earned by the individual during the preceding 12-months was earned from the debtor. Considering I fit this description, should I petition to change my status?
 

Whatdoiknow

Junior Member
Courts have ruled that some independent contractors are priority

Moe,

I am in a similar situation in Massachuscetts. The company I was working at as independent contractor closed shop and their last payment check bounced. The company has since filed for bankruptcy. I am filing a "Proof of Claim" form. I am trying to figure out if I qualify for a 507(a)(4)(A) priority.

In 2002, a judge in Texas ruled that an airplane mechanic who was an independent contractor could be considered an employee and got the priority under 507(a)(4)(A). The judge ruling considered, among other things, that the contractor did the work at the company site, the company provided tools and supplies, and the contractor was under supervision of a company manager. The company was Kitty Hawk in Texas. Here's a link to the ruling.
http://www.txnb.uscourts.gov/opinions/pdf/2000-42141-2812.pdf

Does anyone know of other cases where the court ruled that a non-sales independent contractor qualified for the 507a4A priority?
 

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