Prepetition Liability

Prepetition Liability

A liability that a company incurs before filing for bankruptcy protection. Most prepetition liabilities are reduced or discharged in bankruptcy proceedings; the person or company to whom a prepetition liability is due should not expect to receive the full value of the liability unless it is secured by some asset. A prepetition liability contrasts with a postpetition liability, which usually must be paid in full.
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If the election is made, the member's tax liability for the first short taxable year will be a prepetition liability that is a charge against the bankruptcy estate, though it is not dischargeable.
Exhibit 2: Effects of bifurcation on emergence from bankruptcy Case 1 Case 2 Total tax liability for the year $72,000 $72,000 x Prepetition period liability 11/12 year 1/12 year = Prepetition liability $66,000 $6,000 Postpetition liability 6,000 66,000 Total other unsecured debts 80,000 80,000 Total other administrative expenses 10,000 10,000 Total estate assets $30,000 $30,000
Because this amount is considered a prepetition liability under the Bankruptcy Code, the timing of payment is subject to Bankruptcy Court approval and has not yet been determined.