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Simple English definitions for legal terms
involuntary gap claim
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A quick definition of involuntary gap claim:
An involuntary gap claim is a type of claim that arises during a bankruptcy case. It refers to a claim that is made by a creditor after an involuntary bankruptcy petition has been filed but before the appointment of a trustee or the order for relief. These claims are given priority in payment to encourage creditors to continue doing business with the debtor until the bankruptcy case is resolved.
A more thorough explanation:
An involuntary gap claim is a type of claim that arises in the ordinary course of business after an involuntary bankruptcy petition has been filed but before the order for relief or the appointment of a trustee. This type of claim is given priority under bankruptcy law to encourage creditors to continue dealing with a debtor until the debtor has a chance to challenge the involuntary petition.
For example, if a company files for bankruptcy and a supplier delivers goods to the company after the bankruptcy petition has been filed but before the appointment of a trustee, the supplier may have an involuntary gap claim for payment of those goods.
Another example could be a landlord who is owed rent by a tenant who files for bankruptcy. If the landlord continues to provide services to the tenant after the bankruptcy petition has been filed but before the appointment of a trustee, the landlord may have an involuntary gap claim for payment of those services.
These examples illustrate how an involuntary gap claim can arise in the ordinary course of business and how it is given priority under bankruptcy law to encourage creditors to continue dealing with a debtor.