In re IML Freight, Inc., 52 B.R. 124 (Bankr.D.Utah)
PUBLISHED
See 253.pdf
In a case that began in chapter 11, but was subsequently converted to chapter 7, the court considered several claims for payment of approved professional fees incurred in connection with the chapter 11 proceedings. Trustee established that complete liquidation of debtor's assets would not provide sufficient funds to satisfy all administrative claims. The court noted that professional fees are allowed under 11 U.S.C. § 330, may be paid on an interim basis under 11 U.S.C. § 331, and are considered administrative expenses under 11 U.S.C. § 503(b)(2). All administrative expenses, including professional fees, incurred under chapter 11 are treated in parity with each other. However, pursuant to 11 U.S.C. § 726(b), chapter 7 administrative expenses that are incurred after conversion of a chapter 11 case to chapter 7 are entitled to superpriority, and administrative expenses incurred in the chapter 11 are paid pro rata if there are insufficient funds to pay all administrative expenses in full. Given the substantial doubt that all administrative claims will be paid in full, the court ruled that only the amount that would almost certainly be paid under all possible contingencies would be paid on an interim basis. In the absence of evidence on best and worst case scenarios, trustee's motion to pay all professional fees in full was denied.