Administrative Insolvency

Also known as administratively insolvent. The inability of a debtor in bankruptcy to pay its administrative expenses (www.practicallaw.com/9-382-3217), such as attorneys' fees and other professional fees. Administrative claims must be paid in full as a condition to confirmation (www.practicallaw.com/1-382-3358) of a Chapter 11 plan of reorganization (www.practicallaw.com/9-382-3694), unless administrative creditors agree to less than full payment. Therefore, administrative insolvency usually results in conversion of the case to a Chapter 7 liquidation (www.practicallaw.com/9-382-3590) or a dismissal of the case.

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