Absolute Priority Rule (APR)

Establishes priority of claims under liquidation. Once the corporation is determined to be bankrupt, liquidation takes place. The distribution of the proceeds of the liquidation occurs according to the following priority: (1) Administration expenses; (2) Unsecured claims arising after the filing of an involuntary bankruptcy petition; (3) Wages, salaries, and commissions; (4) Contributions to employee benefit plans arising within 180 days before the filing date; (5) Consumer claims; (6) Tax claims; (7) Secured and unsecured creditors’ claims; (8) Preferred stockholders’ claims; (9) Common stockholders’ claims. APR is similar to absolute priority of claims.