Third Circuit Holds that a Portion of Post-Petition Withdrawal Liability in Bankruptcy Is Entitled to Priority Over General Unsecured Claims

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Recently, the Third Circuit held that withdrawal liability triggered after a bankruptcy filing date may be apportioned to pre- and post-petition service for the debtor, and that the withdrawal liability attributable to post-petition service may be entitled to priority over general unsecured claims under the Bankruptcy Code. Employers that participate in a multiemployer pension plan should determine the claims impact of withdrawal in light of this court decision and also assess whether filing for bankruptcy protection outside of the Third Circuit is appropriate.

The U.S. Court of Appeals for the Third Circuit recently held in In re Marcal Papers Mills, Inc. that withdrawal liability triggered after the bankruptcy filing date may be apportioned to pre- and post-petition liabilities attributable to pre- and post-petition service with the amount of withdrawal liability attributable to post-petition service treated as an administrative expense entitled to priority over general unsecured claims under the Bankruptcy Code.

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